Bahrain c.banker says to keep dollar peg

Bahrain's dinar will remain pegged to the U.S. dollar as it is the best option for the Gulf country's economy, its central bank governor was quoted on Monday as saying."We will keep our currency exchange rate pegged as it best serves our economy," Rasheed al-Maraj was quoted as saying on the sidelines of an economic conference in France.

The small, non-OPEC oil producer plans to form a Gulf monetary union with Saudi Arabia, Kuwait and Qatar. Kuwait is the only Arab Gulf country, which has abandoned the greenback peg in favour of a currency basket to rein in inflation.Analysts expect the members of the union, which is at least five years away, to opt for the dollar peg initially to ensure a smooth transition and also to avoid budget volatility given their dependence on oil revenues.