Oman sees dollar recovering, lifting pegged rial

By Ola Galal

SANAA, April 2 (Reuters) - Oman, one of five Gulf oil producers which peg their currencies to the dollar, said on Wednesday it expects the U.S. currency to recover this year, helping lift its own rial.

The dollar has lost 8.1 percent of its value so far in 2008 and sank to a record low on March 17.

"We expect the dollar to strengthen again, probably towards the end of this year," Omani deputy central bank governor Hamood Hashem told Reuters on the sidelines of a meeting of Arab government finance officials in the Yemeni capital, Sanaa.

Gulf Arab states, especially the United Arab Emirates and Qatar, have faced pressure to revalue their currencies or drop their pegs altogether to help fight inflation at a record or near-record.

"It's not easy," Hashem said of revaluation. "If you revalue, it will not solve the problem of inflation as it's not only caused by the weakness of the currency but other factors." (Writing by James Cordahi; Editing by Gerrard Raven)