The Central Bank of the UAE said AED169.7bn ($46bn) of money was withdrawn from the country in 2008 by investors who had been speculating that the country would unpeg the dirham from the US dollar, causing the value of all dirham-denominated holdings to soar.

In its annual report for 2008, which has just been released, the central bank said its foreign currency assets fell by 59.4 per cent, and added “this decline was mainly attributed to the repatriation of speculative funds when all probabilities of a revaluation of the dirham had faded.”

The withdrawal of such large volumes of funds from the UAE created a liquidity crisis in the banking sector, and caused the central bank to deposit AED120bn in local banks. Despite these measures the Emirates interbank offered rate, a measure of liquidity in the banking sector, is still elevated compared to the rest of the GCC.