DUBAI: Qatar’s one-year currency forwards fell yesterday to their lowest level since May 2012 after the central bank hinted the country could drop its peg to the dollar, although the market expects that any change would be years away.
One-year riyal forwards dipped as low as 10 points bid yesterday from Tuesday’s close of 65, traders said. They still suggest a very slight weakening of the riyal from its peg of 3.64 to the dollar over a one-year period.
“Qatar fell because of yesterday’s news and also the prevailing liquidity with the offshore,” said a Dubai-based trader, who cannot be named under the briefing rules.
Qatar Central Bank Governor Sheikh Abdullah bin Saud Al Thani said on Tuesday that a higher degree of exchange rate flexibility may become more desirable in the future when the Opec member becomes less dependent on hydrocarbons. However, he said no changes were currently being considered.
The United Arab Emirates’ dirham forwards also fell, slipping to -16 points bid, their lowest level since December 2011, while the Saudi riyal forwards touched -21 points, their lowest level since the start of September 2012.
Negative forward points imply a stronger currency compared to the peg over a one-year period.
“They fell because the market thinks that the Qataris and others might be thinking about their policies and currency plans again,” another trader said.
Yesterday, a comment by Standard & Poor’s that Saudi Arabia’s peg to the dollar constrained its rating also fuelled the market activity, traders said. The agency revised the kingdom’s rating outlook to positive. Some traders said Gulf currency forwards were likely to remain under pressure in the near term.
Reuters
