Qatari riyal trades be­low its dol­lar peg

The Star Early Edition - - BUSINESS REPORT - An­drew Torchia and Da­vide Bar­bus­cia

QATAR’S riyal is be­ing quoted weaker than its peg against the US dol­lar as Doha grap­ples with a diplo­matic cri­sis, but that is the re­sult of poor liq­uid­ity in the cur­rency mar­ket rather than a se­ri­ous threat to the peg, bankers in the re­gion say.

The riyal, of­fi­cially fixed at 3.64 to the dol­lar since 2001, has been of­fered as low as 3.6680 since Saudi Ara­bia and other Arab states cut diplo­matic and trans­port ties with Doha on June 5, ac­cus­ing it of back­ing ter­ror­ism.

That was not a big move in ab­so­lute terms, less than 1 per­cent, but it marked the weak­est spot mar­ket rate since July 2005, data shows.

Fur­ther­more, pre­vi­ous dips in the riyal were usu­ally one-day af­fairs, but this time the Qatari cur­rency has been quoted sig­nif­i­cantly weaker than its peg for two weeks.

De­ter­mi­na­tion

Gulf bankers in­side and out­side Qatar, how­ever, said they did not think the spot mar­ket quotes showed any change in Qatar’s de­ter­mi­na­tion or abil­ity to main­tain the peg.

In­stead, they said, the fluc­tu­a­tions seemed to be the re­sult of the way in which eco­nomic sanc­tions against Qatar have dis­torted trad­ing be­tween banks.

Many Saudi, United Arab Emi­rates and Bahraini banks have cut back or sus­pended trad­ing with Qatari in­sti­tu­tions, fear­ing the displeasure of their gov­ern­ments. In­ter­na­tional banks have be­come more cau­tious be­cause of po­lit­i­cal risk.

This has slowed for­eign ex­change trade, par­tic­u­larly be­tween banks op­er­at­ing on­shore and off­shore. – Reuters

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