20 September 2007

Saudis Appear To Drop Dollar Peg on Riyal

The Saudis have been pegging the Riyal to the Dollar for years. One of the things that this requires is that the interest rates in the two countries remain the same, otherwise there are pressures for them to move relative to each other.
The Saudis have made it clear that they will not follow the recent Federal Reserve rate cuts.

This will place further downward pressure on the dollar, and make it more likely that other Arab oil Sheikdoms will follow suit. Kuwait actually preceded them on this action, breaking the peg in May.

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