The United Arab Emirates, the second-largest Arab economy, signalled on Monday that it might cut its holdings of dollars by almost half, highlighting a recent trend of reserve diversification away from the US currency.

Sultan bin Nasser al-Suwaidi, the governor of the central bank of the United Arab Emirates, told a meeting of central bankers from Gulf states in Abu Dhabi that the bank wanted eventually to lower the dollar’s share of its foreign currency reserves to a range of 50-90 per cent. Currently the UAE holds 98 per cent of its $25bn foreign exchange reserves in dollars and 2 per cent in euros.