Business | Banking
Saudi authority quashes riyal revaluation talk
The Saudi riyal slipped against the dollar yesterday after the central bank dismissed as baseless speculation it would revalue the kingdom's currency.
- Reuters
- Published: 00:00 October 25, 2006
Riyadh: The Saudi riyal slipped against the dollar yesterday after the central bank dismissed as baseless speculation it would revalue the kingdom's currency.
The riyal rose to a 5-1/2 month high against the dollar on Monday amid speculation it would be revalued over Eid holidays.
It traded up to 3.7420 per dollar, its highest since early May as investors bet Saudi Arabia would regrade its currency in line with a move by Kuwait that month.
"There is no intention to change the exchange rate," Hamad Saud Al Sayyari, governor of the Saudi Arabian Monetary Agency, told yesterday's edition of Al Watan newspaper.
"The current exchange rate is fair and member states of the Gulf Cooperation Council [GCC] are committed to maintain the current exchange rates of currencies."
His comments pushed the riyal down to trade near 3.75 against the dollar, the level at which it is pegged to the greenback. It slipped to 3.7480 earlier in the session before reaching a bid/offer of 3.7421/3.7471 at 7.30am GMT.
Economists said the main hurdle for revaluation was that it would have to be closely coordinated with other members of the GCC, which plans a regional monetary union in 2010.
"All of the GCC states will keep their currency levels fixed until we have moved closer to the currency union in the Gulf, even though one clearly could argue for a tightening of monetary conditions in most Gulf states including Saudi Arabia," said Lars Christensen, senior analyst at Danske Bank in Copenhagen. "One should however also note that the need for monetary tightening has eased with the drop in oil prices."
Cause
A Riyadh-based analyst said Monday's speculation appeared to have been sparked by growing orders for the riyal ahead of the annual Haj pilgrimage, due to start in late December.
"It's a seasonal thing. Whenever the Haj nears, demand on the riyal surges mainly from banks in the Muslim world," said the analyst.
"Some of these banks, for instance in Egypt, charge fat margins on the sale of the riyal to pilgrims, so they can afford to pay a relatively high price for its purchase," the analyst said.
Share this article
Popular in Business
-
XPRESS
Way to go this DSF
A fun-filled route to guide you to all the happening dos in town
Business Editor's choice
-
Hamdan opens interior design expo
Index 2009 will feature 1,000 exhibitors from 47 nations
-
Marina Residence handovers begin
Despite talk of oversupply, Palm Jumeirah's latest apartments come online.
-
Travel insurance offers peace of mind
The wisest thing to do is to take out travel insurance before you leave.
