Currency News: Qatari Riyal Falls to Lowest Point in Nearly Two Decades

Currency News:

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As Qatar’s relationship with its Gulf neighbors continues to deteriorate, the Qatari riyal fell to an unprecedented low of 3.6575 per USD. With the amount of unease in the geographic area, it is unclear how long this major currency slide will persist. Moody’s has described the geopolitical turmoil as “the worst since the creation of the Gulf Cooperation Council in 1981”. While US president Donald Trump has called for a solution to the crisis, the riyal continues falling.

Qatar keeps its currency under a tight fix around 3.64 per USD, but that stronghold crumbled on Monday. As the dispute continues, investors will lose faith in the riyal. On Tuesday, investors devalued the riyal in the 1 year futures market relative to the dollar to its highest point since 1988. Previous large-scale movement in the riyal was caused by changing oil prices, so this drastic change is highly unusual.

However, there are reasons to be optimistic about the riyal’s future value. The US has an air base in Qatar, providing greater incentive for the US helping end the dispute. Additionally, Qatar has a large reserve of foreign currencies which can support its own currency and overall market. But while Qatar has strong financial buffers, many are rather illiquid, thereby draining their foreign cash reserves.

Overall, the Qatari riyal’s future hinges on how it handles its geopolitical situation over the next few weeks.

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