Saudis to act if dollar goes into free fall

Davos: Saudi Arabia said on Thursday it would take a "precipitous" decline in the dollar for it to change the value of its riyal against the US currency, which has been fixed since 1986.

Asked if a 30 per cent decline in the dollar's value would prompt Saudi Arabia to shift its currency policy, Mohammad Al Jasser, vice-governor of Saudi Arabia's central bank, said: "If there are changes in [the composition of] exports and imports, and the simultaneous precipitous decline in the dollar, of course that's a change in circumstances."

This is the first time a Saudi official has said publicly that there could be circumstances under which it would consider changing the riyal's exchange rate.

The dollar has fallen 16.2 per cent against a basket of major currencies from two years ago, dragging the Saudi riyal lower against the currencies of Europe and many Asian countries.

New wealth fund

Meanwhile, Saudi Arabia is considering setting up a $6 billion sovereign wealth fund to invest the country's surplus oil wealth, but could "live without it" if there is endless debate about suspected abuses.

Al Jasser said: "The fin-ance ministry is thinking about it. But if there is endless debate about abuses, I'm sure we can live without it." The central bank is not involved in any plans to set up a fund, he added.