Moody's: No impact on Gulf states

The Gulf Cooperation Council (GCC) currency union that is planned for 2010 would be unlikely to affect the government bond ratings of its six m. states, Moody's Investors Service said it said.

Many of the common advantages of a currency union are muted in the case of the GCC and the disadvantages also are less applicable given that GCC states already have fixed exchange-rate pegs, the agency said.

Moody's noted that most economic studies indicate that currency unions tend to encourage and facilitate trade between m. states through the removal of exchange-rate volatility and transaction costs within the currency area.

However, in the case of the GCC, the stimulus to trade would likely be more limited than in other cases, Moody's said. The reasons being there is very little exchange-rate risk among the members and because the states lack economic diversity. All six economies are heavily concentrated in hydrocarbons, the agency said.

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