Arab Today, arab today low oil prices put strains on gulf currency pegs
Last Updated : GMT 05:23:14
Arab Today, arab today
Arab Today, arab today

Low oil prices put strains on Gulf currency pegs

Arab Today, arab today

Arab Today, arab today Low oil prices put strains on Gulf currency pegs

Pump jacks are seen at the Lukoil company
Kuwait City - AFP

Weak oil prices pose a threat to Gulf Arab states’ currency pegs against the dollar, but the energy-rich region is unlikely to abandon the policy yet, analysts say. Bahrain, Oman, Qatar, Saudi Arabia and the United Arab Emirates all keep the values of their currencies fixed against the greenback, while Kuwait has a link to a basket of currencies including the dollar. But doubts are growing about whether the policy still makes sense.
The slide in oil prices has battered the economies of the six Gulf Cooperation Council (GCC) member states at a time when an improving American economy and prospects of higher US interest rates are lifting the dollar. To maintain the currency pegs, all GCC members except Qatar raised their interest rates in December, tracking the US Federal Reserve, even though their economies needed exactly the opposite. The Gulf states now face a dilemma of whether to keep the pegs or opt for a flexible exchange rate regime, allowing their currencies to fall against the greenback. “Maintaining a peg is a costly affair. The central bank has to be willing to buy or sell its currency in the open market to maintain the peg, which could deplete forex reserves,” said M.R. Raghu, head of research at Kuwait Financial Centre. “Oil exports, which account for about 80 percent of (GCC) government revenues, have fallen by 70 percent since mid-2014, thus making the currency peg vulnerable as it reduces the foreign exchange reserves,” Raghu told AFP. For now GCC states, with the exceptions of Bahrain and Oman, have huge reserves to defend their pegs. But some speculators are betting that the Gulf states, particularly Saudi Arabia, will be unable to maintain the currency links indefinitely. Jan Randolph, director of Sovereign Risk Analysis at IHS Global Insight, believes the contrasting performances of the US and Gulf economies will increase pressure on the pegs. Monetary policies are also expected to diverge — “stimulating in the GCC and gradual tightening in the United States,” Randolph told AFP. GCC states need weak currencies and low interest rates to boost their waning economies, especially to develop non-oil export sectors, Randolph said. The longer the economic divergence continues, “the more sense it makes to move to a more flexible exchange rate regime,” he said. Maintaining the dollar pegs brings financial stability and certainty to GCC economies amid regional geopolitical tensions. It also helps contain inflation and boost confidence for foreign investment.

arabstoday
arabstoday

Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

Arab Today, arab today low oil prices put strains on gulf currency pegs Arab Today, arab today low oil prices put strains on gulf currency pegs

 



Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

Arab Today, arab today low oil prices put strains on gulf currency pegs Arab Today, arab today low oil prices put strains on gulf currency pegs

 



Arab Today, arab today
Arab Today, arab today Youssra depended on colored foam

GMT 16:53 2017 Tuesday ,05 September

Youssra depended on colored foam
Arab Today, arab today US travel restrictions are still 'Muslim ban'

GMT 00:54 2017 Tuesday ,26 September

US travel restrictions are still 'Muslim ban'
Arab Today, arab today Etiquette expert underlines importance of gifts

GMT 17:52 2017 Sunday ,03 September

Etiquette expert underlines importance of gifts
Arab Today, arab today Israel builds settlements 'at high rate'

GMT 01:04 2017 Tuesday ,26 September

Israel builds settlements 'at high rate'
Arab Today, arab today North Korea 'more opaque'

GMT 10:50 2017 Sunday ,24 September

North Korea 'more opaque'
Arab Today, arab today
Arab Today, arab today
Arab Today, arab today Personality study finds fish have hidden depths

GMT 00:43 2017 Tuesday ,26 September

Personality study finds fish have hidden depths
Arab Today, arab today 'Lady Beast' fights for girl gamers

GMT 10:27 2017 Sunday ,24 September

'Lady Beast' fights for girl gamers
Arab Today, arab today Botanical gardens a lifeboat

GMT 02:50 2017 Tuesday ,26 September

Botanical gardens a lifeboat
Arab Today, arab today The history of solar eclipses

GMT 05:16 2017 Sunday ,20 August

The history of solar eclipses
Arab Today, arab today Chevrolet's first 9-speed auto debuts

GMT 18:58 2017 Monday ,25 September

Chevrolet's first 9-speed auto debuts
Arab Today, arab today Third generation adds more power

GMT 13:40 2017 Sunday ,24 September

Third generation adds more power
Arab Today, arab today Lebleba is preoccupied in filming 'Back Street'

GMT 08:56 2017 Thursday ,21 September

Lebleba is preoccupied in filming 'Back Street'
Arab Today, arab today Conditions growing dire    

GMT 09:22 2017 Monday ,25 September

Conditions growing dire    

GMT 08:59 2017 Wednesday ,20 September

Youssra prepares for launching her program

GMT 10:16 2017 Friday ,22 September

All eyes on May as she prepares

GMT 16:53 2017 Saturday ,02 September

Mai importance of gifts during Eid Al-Adha

GMT 05:05 2017 Sunday ,24 September

Psychologists help Mexico deal

GMT 10:46 2017 Saturday ,05 August

Nanis reveals simple ideas for home renovation

GMT 12:02 2017 Sunday ,24 September

Harry visits mental health hospital

GMT 12:09 2017 Sunday ,24 September

Taxi! Transport gets an overhaul

GMT 17:12 2017 Monday ,07 August

Al-Shawaifi reveals secrets of total solar eclipse

GMT 12:46 2017 Thursday ,21 September

Google likely to buy stake in Taiwan smartphone maker HTC

GMT 11:37 2017 Saturday ,12 August

Fashion designer reveals her new collection
Arab Today, arab today
Arab Today, arab today
 
 Arab Today Facebook,arab today facebook  Arab Today Twitter,arab today twitter Arab Today Rss,arab today rss  Arab Today Youtube,arab today youtube  Arab Today Youtube,arab today youtube
arabstoday arabstoday arabstoday arabstoday
arabstoday arabstoday arabstoday
arabstoday
بناية النخيل - رأس النبع _ خلف السفارة الفرنسية _بيروت - لبنان
arabstoday, Arabstoday, Arabstoday