Qatar peg under stress
Qatar peg under stress
Economy

Qatar peg under stress

Pennews

Qatari Riyal (QAR), the state of Qatar’s currency, is under stress. The QAR is pegged to the USD at 1USD = 3.64QAR. The recent tensions in the region have taken a toll on the currency of the Middle East nation. While the central bank has not intervened directly in the international markets, the country has deep pockets to do so. Central bank data indicates that it had approx. USD 35bn as of May 2017 in International reserves. The country also has one of the largest sovereign wealth funds to fall back on, with estimated assets of USD335bn.

That said, if the impasse continues it is likely to put pressure on Qatar which is currently focussed on finishing extensive construction activity for the FIFA world cup in 2022. The current liquidity squeeze has already pushed Qatar’s 3 month interbank rate to upwards of 2.44% (less than 1.58% a year back).

Qatar’s central bank might look at direct intervention to improve liquidity in the system and support the peg internationally. The central bank might also impose capital controls. However, any revision in Qatar’s peg to the USD, will increase both domestic inflation and volatility in the FX rates of its neighbours.

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