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Mon 14 Mar 2016 03:42 PM

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Saudi central bank governor vows to keep currency peg

Currency speculators have put pressure on the riyal in recent months because of impact of lower oil prices

Saudi central bank governor vows to keep currency peg

Saudi Arabian Monetary Agency (SAMA) Governor Fahad al-Mubarak said he was committed to maintaining monetary policy to keep the kingdom's decades-long currency peg of 3.75 riyals per dollar in comments published on the central bank website on Monday.

Currency speculators have put pressure on the riyal in recent months because of the impact of lower oil prices on Saudi Arabia's fiscal balance, causing a projected large deficit this year.

"I would like to assure that the monetary agency will continue to manage its monetary policies to achieve the goal of stabilising the value of the riyal at the exchange rate of 3.75 riyals to the dollar," Mubarak said in a speech published on the website.

While Mubarak has previously pledged to maintain the riyal's dollar peg, unbroken since 1986, SAMA did in January intervene by warning local commercial banks to avoid betting on a currency devaluation.

In order to pay the government's bills as its oil revenues shrink, SAMA has been drawing down its overseas assets at an annual rate of more than $100 billion, although it still has enough to support the riyal for several years.

In February, Societe Generale said it estimated there was at least a 25 percent chance of a near-term devaluation of the riyal, rising to 40 percent is oil prices stayed at current levels throughout the year. Other institutions said they expected Riyadh to maintain its currency peg.