Qatari riyal trades below its dollar peg
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.
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