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A Rare Occurrence In The Saudi Currency Market Tells You That Trouble Is Brewing In The Middle East
TBI ^ | 10-3-2012 | Matthew Boesler

Posted on 10/03/2012 5:52:32 PM PDT by blam

A Rare Occurrence In The Saudi Currency Market Tells You That Trouble Is Brewing In The Middle East

Matthew Boesler
October 3,2012

An important shift is developing in Saudi Arabian currency derivatives markets as Iran becomes engulfed in populist protests amid hyperinflationary pressures and armed conflict breaks out between Turkey and Syria, heightening concerns about tensions in the Middle East.

The 12-month forward rate on the Saudi Arabian riyal – or the difference between how many riyals traders think a dollar will be able to buy a year from now versus how many riyals a dollar can buy today – has been hovering just above zero for the past two weeks.

In other words, as pointed out by BNP's Bartosz Pawlowski, traders are expecting the riyal to depreciate against the dollar.

And that is something that almost never happens – unless markets are getting really worried about Saudi Arabia, one of the most stable countries in the region.

Here is a chart that shows the latest move above the zero level (that tiny blip at the far right) and also puts into perspective how rare of an occurrence it is for the rate to do so:

The reason the SAR 12m forward rate is usually way below zero, as most of the chart shows, is because Saudi Arabia runs a massive trade surplus due to its central role as oil exporter in the global economy. In other words, one would usually always expect the riyal to appreciate against the dollar.

But Saudi Arabia's currency is pegged to that of the U.S. – at a rate of 3.75 riyals per dollar.

Because the exchange rate is fixed, the value of the riyal isn't such a great way to read the market's views on Saudi Arabia

(snip)

(Excerpt) Read more at businessinsider.com ...


TOPICS: News/Current Events
KEYWORDS: currency; economy; iran; middleeast

1 posted on 10/03/2012 5:52:43 PM PDT by blam
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To: blam

If am understanding correctly, all have read, the saudis are supporting the rebels. russia supports assad. iran supports assad. Turkey is going to shoot at the rebels or assad? Thinking assad did shoot down the Turkish plane, and thinking the rebel fired the mortars into Turkey.


2 posted on 10/03/2012 5:58:04 PM PDT by no-to-illegals (Please God, Protect and Bless Our Men and Women in Uniform with Victory. Amen.)
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To: blam
Forgot to ask a question ... Which side is playing Turkey, the rebels or assad?
3 posted on 10/03/2012 5:59:51 PM PDT by no-to-illegals (Please God, Protect and Bless Our Men and Women in Uniform with Victory. Amen.)
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To: blam

Are Saudi riyals and Iranian rials, the same thing?


4 posted on 10/03/2012 6:05:26 PM PDT by carriage_hill (Libs, dems, unions, leftist scum & murderous muzzies - are like bacteria: attack, attack, attack!)
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To: carriage_hill

No, just as US and Canadian dollars are not the same thing.


5 posted on 10/03/2012 6:08:35 PM PDT by oblomov
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To: AdmSmith; AnonymousConservative; Berosus; bigheadfred; Bockscar; ColdOne; Convert from ECUSA; ...

Thanks blam.


6 posted on 10/03/2012 7:44:52 PM PDT by SunkenCiv (https://secure.freerepublic.com/donate/)
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Comment #7 Removed by Moderator

To: oblomov

Makes sense; thanks.


8 posted on 10/04/2012 1:34:08 AM PDT by carriage_hill (Libs, dems, unions, leftist scum & murderous muzzies - are like bacteria: attack, attack, attack!)
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