The UAE central bank has no exposure to euro zone debt in its reserves and it only invests in countries and corporates rated AAA as required by law, a senior central bank official said.

Gulf oil exporters such as the UAE mainly invest in dollar assets since most peg their currencies to the US dollar with crude oil, priced in dollars, accounting for a majority of budget revenue, said a report in our sister publication, the Gulf Daily News.

Asked whether the UAE central bank held any euro zone debt in its reserves, Saif Hadef Al Shamsi, senior executive director at its treasury department, said: 'Currently, no.'

'It is very much prescribed in a law, we only invest in AAA-strong countries,' he said after a meeting of Gulf central bank governors in the UAE capital Abu Dhabi, when asked if investing in troubled European assets was an option.

Al Shamsi also said the central bank invested in diversified and liquid instruments: 'Problem countries? No. Investments...in securities is through a careful examination, survey.'

The central bank's foreign currency assets edged down to a three-month low of Dh199.1 ($54.2 billion) in June. But within that total, holdings of foreign securities rose to Dh86 billion in June, the highest level since at least 2007, its data show.

Asked about the central bank's gold holdings, Al Shamsi said: 'We do not have any gold. We used to have.

'When it was there it was available on the balance sheet. Now, it's not there so it is not available,' he said.

The central bank held Dh333 million worth of gold in December 2002, the last year when gold holdings appeared on its balance sheet, according to its annual reports.

Saudi Arabia's central bank governor said last week that the Saudi monetary authority was not interested in buying distressed or speculative assets such as troubled European debt and gold.

UAE banks should not feel any major pain from the euro zone debt crisis, UAE central bank governor Sultan Nasser Al Suweidi told a news conference after the meeting. 'It should not have a big impact,' he said.

Meanwhile, Union of Arab Banks chairman Adnan Yousif said that Gulf and Arab banks will not be affected bythe European debt crisis. This is mainly due to the fact that Gulf banks had sold most of their portfolios, about $200 million in European banks, representing about five per cent of their investment portfolios, he said. – TradeArabia News Service