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18 July 2024

Qatar denies depegging report

By Agencies



Qatar denied on Thursday reports that it was planning to revalue its dollar-pegged currency or drop the link altogether next month.


On Tuesday Dubai-based news agency Zawya Dow Jones said Qatar could drop its peg in April in a bid to control soaring inflation. It cited an unidentified central bank official.


The Central Bank of Qatar "denies what was published in some media reports attributed to one of its officials that it was planning to announce soon the revaluation of the Qatari riyal or dropping its peg to the dollar," it said in a statement.


Deputy Central Bank Governor Sheikh Fahad bin Faisal Al Thani denied the report in its "entirety" and affirmed that Qatar remained committed to a 2001 decision to peg its currency to the dollar at QAR3.64, it said.


Nonetheless, Qatar is considering options regarding its foreign exchange policy as the dollar weakens, it added.


"This is a response to the pressure on the riyal recently," said Marios Maratheftis, Middle East economist at Standard Chartered in Dubai. "Still, they are not denying that they are considering their options."




The Qatari riyal hit its highest level in more than three months on Wednesday as investors bet some Gulf oil producers could revalue their currencies to fight inflation.


It will keep its riyal pegged to the dollar at the same rate for now, its central bank governor said on Wednesday, as the oil producer grapples with near-record inflation and bets of imminent currency reform.


"The view of the Central Bank of Qatar until the moment is: there is no change in policy about depegging from the dollar," Sheikh Abdullah bin Saud Al Thani told a news conference after a Gulf Arab meeting with the European Central Bank.


Since January, Qatar's prime minister, finance minister and an economic adviser to the Emir have said they are studying all options on currency reform to fight inflation that hit 13.74 per cent in the fourth quarter, just off a record.


It was natural for Qatar to study the dollar issue given the weakness of the dollar, Sheikh Fahad said in the statement.


"But what is certain is that no decision has been made on this issue," he added.


Like its neighbours in the world's biggest oil-exporting region, Qatar is constrained in its fight against inflation by the peg, which forces it to cut interest rates in line with the US Federal Reserve, which is trying to ward off recession.


By contrast, Gulf economies are surging on a five-fold rise in oil prices since 2002.


The weakness of the dollar was contributing about 40 per cent of the inflation in Qatar, whose currency is undervalued by as much as 30 per cent, the Prime Minister told Reuters last month.


Kuwait let its dinar rise the most against the dollar in almost eight months on Thursday, taking its cumulative gain above seven per cent for the first time since it became the only Gulf Arab oil producer to drop its dollar peg 10 months ago.


The dinar will trade 0.78 per cent higher around a mid-point of 0.26910 against the dollar, versus 0.27120 on Wednesday, the central bank said.


The dollar hit a record low against the euro and a 12-year low against the yen on Thursday, and shares fell as euphoria subsided about the latest helping-hand from the US Federal Reserve and reality - $110 oil and recession fears - returned. (Reuters)