Saudi Arabia seen upholding dollar peg policy
New Saudi central bank head seen upholding dollar peg policy
Riyadh: Saudi Arabia's new central bank governor is set to keep the oil exporter's dollar-pegged monetary policy intact amid a harsh global economic crisis, analysts said on Sunday.
The world's top oil exporter named Mohammad Al Jasser governor of the Saudi Arabian Monetary Agency (SAMA) on Saturday.
Hamad Saud Al Sayyari asked to step down after 26 years at the helm of the Gulf's most influential central bank.
Jasser, who holds a PhD in economics and represented the kingdom at the International Monetary Fund, will likely uphold strategies such as a near 23-year policy of linking the riyal to the USdollar and investing in low-risk foreign assets.
"I don't think you will see a sea change in current monetary policy," said John Sfakianakis, chief economist at SABB bank, HSBC's Saudi affiliate.
"He is a believer at the moment that the peg serves a very important purpose and it is to its advantage. I think SAMA will hold its position on currency policy, on being a proponent of the common Gulf currency and allocating foreign assets in a very conservative manner."
After joining SAMA as vice governor in 1995, Jasser, 54, helped devise the bank's reaction to this decade's oil price rally, an onslaught of currency speculation in 2007 and, most recently, its reaction to an oil price slump and credit crisis.
In 2007, as the dollar hit repeated record lows against the euro, currency speculators piled into Gulf Arab currencies on expectations that they could follow Kuwait's lead and sever their dollar pegs to fight decades-high inflation.
The currency bets drove the Saudi riyal to its strongest level in the peg's history. But like Al Sayyari, Al Jasser stood steadfastly by the peg, saying at the height of speculation last February that the peg served Saudi interests.
Monica Malik, regional economist at EFG-Hermes said: "The view is that Jasser played a central role in the good management of the liquidity boom and now you haven't got the same problems in Saudi Arabia as you have in other Gulf countries..."
