Kuwait's central bank allowed the dinar to appreciate against the dollar on Sunday after the US currency fell against the yen.

The dinar will trade around a mid point of 0.28150 per dollar compared with 0.28160 on Thursday, the central bank said, allowing an appreciation of 0.04 percent.

The currency of the Middle East's fourth-largest oil exporter has risen 2.71 percent since May 19, a day before the central bank dropped its peg to the weakening dollar and adopted a basket of currencies. Kuwait has declined to give the composition of the basket.

The central bank says the dollar's decline on global markets is driving up inflation and making some imports more expensive.

The US currency hit a record low in July against the euro in which Kuwait pays for more than a third of its imports.

Central Bank Governor Sheikh Salem Abdul-Aziz al-Sabah said on July 29 the basket gave the bank flexibility to track moves on global foreign exchange markets, state news agency Kuna reported.

In late New York trade on Friday, the euro fell 0.10 percent against the dollar to $1.3622. The euro has gained 3.23 against the dollar this year.

The dollar fell 0.14 percent against the yen as investors debated whether the credit crisis would drag on global growth despite initial enthusiasm for a White House plan to help US homeowners cope with tough lending conditions. - Reuters