Capital inflows into the UAE, boosted by unrest in Bahrain, brought interbank offered rates to a seven-year low yesterday as liquidity stayed high in the Gulf state's banking sector.
Bank deposits in the world's No 4 oil exporter rose in April to their highest level in at least two years. However, UAE banks are still hesitant to lend following Dubai's debt woes and weakness in the property sector.
"In the last quarter we have seen a substantial amount of liquidity returning to the region, from Gulf states into the UAE as well as international investors looking for carry," said Benoit Anne, head of emerging market strategy at Societe Generale in London.
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