Inflation has been plaguing the world's biggest oil-exporting region, where most states peg their currencies to the ailing dollar despite the fact that their economies are booming on a more than six-fold rise in oil prices since 2002.

'Inflation is a short-term temporary issue here because it is derived from the real estate market which must eventually stabilise,' Sultan Nasser Al-Suweidi said in a report published in the latest edition of Dubai-based weekly magazine Arabian Business.

'The same goes for food commodities, because supplies will increase since agriculture is of a cyclical nature,' he said.

Dollar pegs have forced Gulf central banks to track seven interest rate cuts by the US Federal Reserve since last September, even as inflation climbs to record and near-record peaks.

Inflation in the UAE probably hit a 20-year peak of 11.4 percent last year, according to a Reuters poll in May. Inflation figures for last year have not yet been released.

'Prices may be going up here while the dollar is falling there, but we should know how to deal with these problems when they pop up because that's the nature of our business,' Al-Suweidi said.

Asked what events could prompt the UAE to change its stance of being committed to its dollar peg, Al-Suweidi said: 'What other major events could occur?'    

'In the West, there's been a collapse in the real estate market, there have been subprime issues, liquidity problems, a credit crunch -- you name it,' he said.

The subprime mortgage crisis has created attractive investment opportunities for regional sovereign wealth funds awash with cash, Al-Suweidi added.

'We have a surplus of money from sales of oil and gas,' he said. 'This surplus has to be invested, and the place is for it is the US because the market there is cheap, it is liquid and you have better opportunities than even Europe.'    

The United States offered attractive investment opportunities for Gulf Arab investors flush with petrodollars, Al-Suweidi said. - Reuters