Thursday 14 / November / 2024
Muscat: Oman remains committed to the peg of its rial currency against the US dollar, the head of the central bank said on Tuesday, after the rial dropped to its lowest level in the forwards market for a decade.
One-year dollar/rial forwards - deals that will be settled in 12 months’ time - jumped on Monday as high as 1,500 points, their highest since 2006, according to a Reuters report. That implied the rial would depreciate about 4 per cent from its peg.
Forwards came down slightly to 1,400 points by Tuesday afternoon, but currency dealers said the market’s move this week showed some bankers were identifying the Omani rial as the most vulnerable currency in the six-nation Gulf Cooperation Council, the Reuters report added.
Posted deficit
The government of Oman posted a $11.7 billion deficit last year and has forecast another sizeable deficit this year despite spending cuts. The plunge of the Brent oil price to near $30 a barrel, from around $100, 18 months ago has created some unease about all the Gulf Cooperation Council currencies. But the United Arab Emirates, Qatar and Kuwait have hundreds of billions of dollars of overseas assets.
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Saudi Arabia’s riyal has come under pressure in the forwards market but that pressure has eased since Riyadh warned banks not to speculate against its currency and threatened to mobilise its huge reserves against speculators.
Central Bank Executive President Hamood Sangour Al Zadjali told Reuters on Tuesday that Oman had no intention of altering its currency peg.
“Nothing changed. We are committed to the peg with the US dollar. The interest rate has not changed,” he said, adding that the rial’s weakness in the forwards market might be partly due to the strength of the US dollar globally.
Keen to boost economic growth, the Omani central bank has so far resisted pressure to raise its official interest rates in line with the US Federal Reserve, which hiked rates by 0.25 percentage point in December.
