KUWAIT CITY: Foreign assets of Kuwait's central bank posted their sharpest monthly increase in at least five years as speculators piled into the Kuwaiti dinar betting on a revaluation.

Central bank foreign assets surged 46 per cent to 6.02 billion dinars ($20.82bn), more than double the rate of increase in the previous month. Kuwait's dinar, like other currencies in the Gulf Arab region, is pegged to the US dollar, but speculation has grown that the Opec oil producer would allow its dinar to appreciate as the dollar weakens.

"This looks to be reflective of increased speculative inflows that the central bank had to offset to avoid a move in the peg," said Standard Chartered head of regional research Steve Brice.

The inflow of dinars could be boosted by Qatar Telecommunication Company's $3.72bn acquisition of a majority stake in Kuwait's National Mobile Telecommunications Company in March, said National Bank of Kuwait chief economist Randa Azar-Khoury.

Net foreign liabilities of local banks in March were 36.4 million dinars compared to foreign assets of 906.5m dinars in February. Local banks as well as foreign funds are likely increasing dinar holdings in anticipation of a revaluation, Brice said.

"As we indicated when the Kuwaiti central bank was responding to speculative inflows by cutting rates, it was important to note that while the focus was on hedge funds, local players were also an important factor in the change of sentiment," Brice said.