Currency traders and hedge fund managers are making big bets that currencies of Persian Gulf nations are set to soar.

They think Gulf currencies will rise against the U.S. dollar significantly as pegs to the green back are cut and inflation flares up in their booming economies.

Everest Capital Ltd., a $3 billion hedge fund specializing in emerging markets, alerted investors that they expected Saudi Arabia, Qatar, and the United Arab Emirates would "loosen" dollar pegs on their currencies, which could beef them up vis-à-vis the U.S. dollar.

Everest, with headquarters in Bermuda, forecasts increasing pressure on Gulf states to cut their currency ties to the U.S. dollar as inflation climbed.

With an ever-weakening dollar in oil-producing nations, the price of oil could skyrocket even higher, causing more pain at the pump and among big users of petroleum-based energy such as chemical manufacturers, heavy industry, and aviation.

World currencies linked to the U.S. dollar are like "buoyant rafts dragged underwater by a heavy boat anchor," says Art Steinmetz, manager of a $12 billion international bond portfolio for Oppenheimer Funds.

"The rope is pretty strained," Steinmetz told The Wall Street Journal. "And once it breaks, the rubber raft is going to shoot to the surface."

Everest has already posted a significant win in the Middle Eastern currency game, betting a year ago that the Kuwaiti dinar would get stronger once its tie to the U.S. dollar was cut. Kuwait was the first Gulf nation to unlink from the dollar.

The winning play for Everest was buying currency forwards and hedging with sell options. When Kuwaiti currency went up, Everest was in a position to take profits.

Elsewhere in emerging markets around the world, the value equivalencies of the U.S. dollar to local currencies are being revised or cast off altogether as economic growing pains afflict various developing nations and their relationship to the global economy.

Among other countries rethinking or revising their currency links, official or otherwise, to the U.S. dollar are Ukraine and Russia.

Ukraine announced recently it was changing its dollar peg in a move to further strengthen its currency, the hyrvnia.

Russian and Vietnamese currencies are also gaining on the beleaguered buck. Steinmetz's fund rode the upswing, and has reaped better than 13 percent year to date.

The Chinese yuan seems also upward bound, although not officially wed to the U.S. dollar. Previously reined in tightly by government control, the yuan is now being permitted a five percent increase.

Investors are monitoring Chinese currency values, anticipating further strengthening.