Saudi reassures on riyal peg, forwards market pressure eases

Pressure on the Saudi Arabian riyal in the currency forwards market eased on Tuesday after a senior Saudi central bank official said the kingdom was committed to keeping the riyal pegged to the U.S. dollar.

“On this occasion we would like to confirm that SAMA is committed to the policy of pegging the Saudi riyal with the American dollar,” Ahmed Abdulkarim Alkholifey, deputy governor for research and international affairs at the Saudi Arabian Monetary Agency, told Al Arabiya television.

He said the central bank was monitoring the forwards market situation, and that both it and independent organisations, which he did not name, believed the riyal’s peg of 3.75 to the dollar served the Saudi economy well.

Saudi central bank officials rarely speak in public and Alkholifey’s remarks may have been designed to ease market jitters about the peg, which had increased in the last few days as sliding oil prices hurt the export revenues of the world’s top oil exporter.

One-year dollar/riyal forwards, which had risen to 12-year highs as banks hedged against the risk of riyal devaluation, dropped as low as 200 basis points after Alkholifey spoke, from the previous day’s close of 295.

They were also pulled down by a 7.4 per cent rebound in the Saudi stock market in response to firmer global bourses and oil prices.

Alkholifey also said Saudi Arabia’s economy was expected to grow 3 per cent this year. In a report earlier this month after annual consultations with Saudi authorities, the International Monetary Fund predicted 2.8 per cent.