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Oil Recovery Hits Saudi Devaluation Bet
[BLOOMBERG] Oil’s rebound to about $40 a barrel means some investors are nursing losses after betting that Soddy Arabia...a kingdom taking up the bulk of the Arabian peninsula. Its primary economic activity involves exporting oil and soaking Islamic rubes on the annual hajj pilgrimage. The country supports a large number of princes in whatcha might call princely splendor. When the oil runs out the rest of the world is going to kick sand in the Soddy national face... would abandon its three-decade-old currency peg. Contracts used to speculate on the kingdom’s exchange rate in the next 12 months have fallen to about the lowest since November. A $1 million wager on the contracts at their peak in January would have lost 68,900 riyals ($18,370), or about 1.8 percent, according to Bloomberg calculations. Several U.S.-based hedge funds were said in February to be among investors that have bet Saudi Arabia would devalue the riyal. The decreased speculation that Gulf nations will abandon their dollar pegs underscores how crude prices have recovered this year. Oil, Saudi Arabia’s main source of revenue, is headed for a second straight monthly gain. The Saudi riyal has been trading at a rate of 3.75 per dollar since 1986, and the kingdom has taken steps to make speculating against the currency harder. "We have argued that those positioning for a devaluation were going to be disappointed," said Simon Williams, the London-based chief economist for central and eastern Europe, the Middle East and North Africa at HSBC Holdings Plc. "The pegs have been in place for 30 years in times of high oil prices and low oil prices. I have no sense" that recent losses in crude are "going to change policy makers’ minds or force their hand," he said. Posted by: Fred 2016-03-28 |
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