Saudi Arabia’s currency has hit a record two-year low and its international bonds also recently lowered after worries that foreign investors could pull out while Riyadh faces mounting pressure from the absence of journalist and Saudi dissident Jamal Khashoggi.
Trade in foreign currencies has been used by banks for hedging investments suggests that foreign institutions are looking to cut their losses or dealing with the risk of sanctions by the U.S. government over Khashoggi’s political dissent. While the market has moved, its recent activity seems to have slowed in response to instability over the last few years, with some analysts being reminded of the state of oil prices around 2014.
While the American president threatened sanctions against Riyadh should it turn out that Khashoggi was harmed within Instanbul’s Saudi consulate, as the Turkish government reports, the Saudi government has rebuked this claim and threatened to lay down harsher sanctions. The price of oil has only slightly shifted after analysts second-guessed Saudi Arabia’s claims, believing that the threat of international outrage and financial devastation would be too harsh a self-inflicted punishment to carry out, especially as the country is working to broaden its economy and employ more.
Currently, the riyal has reached an American dollar exchange ratio of 3.7524 to 1, marking it the worst exchange since September of 2016. Saudi Arabia’s centralize bank maintains a rate of 3.75 riyals to the dollar, usually with a variance of 0.005. November of 2015, a time when oil prices were flooring, saw the riyal at nearly 3.76. The forwards market, saw the dollar rise as high as 100 to one riyal after a rating of 54 just three days earlier. 2016 saw the value briefly exceed 1,000 points.
Several financial analysts believe that the foreign currency flow into Saudi Arabia was already quite low due to a tepid private sector and worries over regulation, both potential factors that could reduce cash flow. Several media organizations and executives have withdrawn from a major Riyadh investment conference.
The Khashoggi case has caused Saudi Arabia’s stock market to drop 7.2 percent in just two days, with only a slight two percent recovery to start the week. traders said that foreign investors were purchasing low-priced stocks in the hope that Saudi Arabia’s financial situation will remain unchanged.