The Central Bank of Kuwait (CBK)  is afraid of speculation against its dinar,
just like George Soros speculated against the British pound sterling,
One of the reasons for this speculation would be the proposed Gulf Monetary Union (GMU).
( 2008/09/28 – CBK: Breaking the Bank
http://chartsandnumbers.com/2008/09/28/cbk-breaking-the-bank/ )

The CBK will however take the lead in achieving the GMU.

Great Britain joined the European Exchange Rate Mechanism (ERM) in October 1990. The ERM prevented the exchange rate between the pound sterling and other member currencies from fluctuating by more than 6%. In the wake of the rejection of the Maastricht Treaty by the Danish electorate in a referendum in the spring of 1992, and announcement that there would be a referendum in France as well, those ERM currencies that were trading close to the bottom of their ERM bands came under pressure from foreign exchange traders, says Wikipedia.

http://en.wikipedia.org/wiki/Black_Wednesday

Soros learnt from the President of the Bundesbank, the German Central Bank, Helmut Schlesinger, that he, the latter, was not quite happy with this fixed basket of currencies. Soros realised that just as the Italian lira was forced out of the ERM, the position of the pound sterling inside the ERM was untenable. He decided to throw the pound sterling out of the ERM when the British government increased interest rates by 2 percent in order to defend sterling.
(George Soros, “Soros on Soros”, John Wiley and Sons, 1995, pp. 81-82)

In May 2007, Kuwait has taken the bold step to depeg the dinar from the dollar and to peg the dinar to a basket of currencies.

The ERM was also a basket of currencies.

Britain was thrown out of that basket.

The dinar is pegged to a basket.

Speculation against the dinar cannot change the value of the basket to which the dinar is pegged.

Speculation against the dinar could only change the value of the dinar vis-à-vis that basket.

But then the dinar would no longer be pegged to that basket.
Indeed, in that case, the basket would be a freely floating reserve,
just like the gold and oil reserves of the GCC
will be the freely floating reserves of the GCC Single Currency (GSC).

In that case, every increase in the price of gold will lead to an increase in the value of the GSC.

At the present moment, the fact that the dollar is still being used as the intermediary numéraire for oil-trade settlement (as the intermediary basic “standard” by which values are measured for oil-trade settlement) gives this dollar-paper the backing of oil (oil becoming an indispensable valuable).

Once oil will see no more reason to support/back the dollar, oil will “openly” shift towards gold and back it (through demand for gold) so as to create the new market for physical gold in association with the gold-friendly euro-numéraire.

Oil will thus become the GSC.

I said four paragraphs ago that in the case of the gold and oil reserves of the GCC being the freely floating reserves of GSC, every increase in the price of gold will lead to an increase in the value of the GSC.
I now said that oil will be the GSC.
Put together, this means that every increase in the price of gold will lead to an increase in the price of oil (the GSC).

By depegging from the dollar, Kuwait has thus shown the way for the GCC to achieving the GSC, a freely high-floating price of oil.

The planned GMU is thus not a danger for the CBK, but an opportunity for the CBK to demonstrate how wise it, the CBK, was to depeg the dinar from the dollar.

ivocerckel@siquijor.ws