Kuwait allowed the dinar to rise by the most in almost two months on Sunday after the dollar tumbled to a record low against the euro, breaching $1.40.

The dinar will trade around a mid point of 0.28050 per dollar, compared with 0.28125 per dollar, the Central Bank of Kuwait said.

The 0.27 percent appreciation is the biggest one-day rise since July 25 and takes the dinar to its highest level since December 1988.

The 13-nation European currency vaulted above the psychologically key $1.40 to the dollar on Thursday, striking an all-time high as investors kept dumping the US currency after the Federal Reserve's 50-basis-point interest rate cut last week.

In late New York trade on Friday, the euro was up 0.10 percent against the dollar. It has gained 6.74 percent against the US currency since the beginning of the year.

The currency of the Middle East's fourth-largest oil exporter has now risen 3.08 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.
Kuwait pays for more than a third of its imports in euros.

Central Bank Governor 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. - Reuters