Friday, September 11, 2015

Bloomberg:Saudi Central Banker Sees no Threat to Dollar Peg

One thing you see around the internet is the idea that Saudi Arabia is about to announce that they will stop using the US dollar as the currency for oil trading. It is part of an idea that the US dollar is about to be dethroned and replaced. Usually the Chinese yuan is suggested as the currency to replace the dollar. But as we see in this article, when actual officials make public comments, they do not say anything that would suggest a change like this is underway or expected to be any time soon. Below are some quotes from this Bloomberg article quoting a Saudi central banker.

"Central bank Governor Fahad Al-Mubarak said Saudi Arabia will stick with its currency peg as long as oil underpins the economy, dismissing speculation that the country’s currency system is coming under pressure.
Investors have increased bets that Saudi Arabia and others in the region will be next to drop their pegs after China devalued the yuan and Kazakhstan allowed its currency to float. One-year forward contracts for the Saudi riyal, an indicator of where investors expect it to trade, are near the highest since 2003.
Looking at our economy now, in the near future and for many years to come, oil will be dominant in our economy so keeping the peg will be our policy,” Al-Mubarak said in a Bloomberg Television interview in Ankara, where he attended the G-20 meeting of global finance chiefs. “Stability is very important to the Saudi government, to Saudi investors and international investors.” 
The peg of 3.75 riyals to the dollar has “served our economy well” for more than three decades and recent volatility in the forwards market reflected speculation, he said. “Definitely we’re solid and confident that this is a good policy for our exchange rate,” Al-Mubarak said."

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