UAE's one-year currency forwards fell on Monday after climbing to a nine-month peak earlier in the session due to fears over Dubai's debt, Reuters data showed.

One-year dirham forwards rose as high as 161 points on Monday, their highest level since February, from Friday's close of 85 points. They were quoted at 70/100 points as of 0932 GMT after initial jitters subsided.

'The liquidity has not dried up yet but spreads are wider,' a Dubai-based treasurer said. 'There is nervousness about Dubai, some banks might be facing flight of liquidity from the system.'

Dubai sent jitters through global markets last week when it asked for a six-month repayment freeze on debt issued by two of its flagship developers - just before a four-day local holiday.

The UAE central bank opened a new emergency liquidity facility for commercial banks on Sunday in a move to reassure the market, which feared depositors could panic and withdraw cash from banks.

Interbank lending rates rose only slightly at the central bank's fixing earlier on Monday as banks seemed to face no liquidity shortage for now, treasurers said.

Traders use forward markets to bet on the future direction of currencies.

The initial move in UAE dirham forward showed bets on around 0.42 per cent weakening in the dirham over a one-year period, although a dealer said there was no speculation on the dirham peg change, seen as highly unlikely, at the moment.

'Not as yet. Everyone will wait and watch and will see how it goes. I think by next week there will be more clarity on this,' a dealer in Dubai said.

The UAE dirham is pegged to the dollar at 3.6725.-Reuters