Impact and Future of Arabian Currencies Linked with Us DollarImpact and Future of Arabian Currencies Linked with Us DollarImpact and Future of Arabian currencies linked with US DollarThe US dollar has hit fresh lows against the euro, yen and other major currencies including and looks set to weaken further in the year ahead.Dollar weakness has been the overriding trend in currency markets this year. its expected to dominate for at least another year until the US current account deficit is brought down to more sustainable levels.
Since the Gulf currencies are pegged to the US dollar, as the dollar declines in value so do they. The dirham, dinar and riyal have all touched fresh lows against the major currencies. The dollars fall and future direction will have an important impact on all the Gulf economies.
The most visible impact of a weaker dollar in the region has been in the increase in the price of imported goods. The Gulf imports the majority of its goods from Asia followed by the Eurozone. The US only accounts for 13% of the Gulf Co-Operation Councils total imports. Higher prices raise costs for importers and reduce the spending power of Gulf consumers. Sectors already facing supply squeezes, such as construction materials, have been particularly hard hit. Global competitive pressures, the open nature of the Gulf economies and the relative ease with which local companies can switch to lower cost suppliers will prevent runaway inflation, but consumers will need to prepare for higher prices next year.
— Posted on 20 November 2014, 17:40:46 UTC by: Kym
[Edited on 24 November 2014]
“The US government will put in place an intergovernmental aid scheme to take advantage of weak dollars, this way they can buy more of the Gulf Cooperation Council and save at least US$1 billion per year. In our view, this would also create a market where exports can move quickly to the rest of the world and allow US-flagged firms (a sector already seen as a serious threat to global competitiveness) to export low-cost, cheaper, higher quality goods to the rest of the world in exchange for low cost prices.”
— Posted on 20 November 2014, 17:52:06 UTC by: kjohr
[Edited on 24 November 2014]
“To address the growing concern about a global financial crisis resulting from a weak pound, the Government of the U.S. is expanding access for the export of highly premium, high volume Gulf, oil-trader manufactured equipment and manufacturing to the U.S. market. This would save US$1 billion every year, increasing exports of oil, natural gas and coal-related products. We would also promote investments in quality-of-life enhancements such as better ventilation and water pollution to promote the flow of water across the Gulf. In short, we believe that, with our international business, that money can grow and it can be used in a meaningful manner to help US competitiveness and prosperity. ”
— Posted on 20 November 2014, 17:55:25 UTC by: Kjohr
[Edited on 24 November 2014]
“[The recent developments will help] the U.S. in its bid to reach a financial settlement on one of its key economic targets for the coming year: the International Monetary Fund. Over the past ten years, the Fund has successfully managed to meet its objectives by increasing the world’s borrowing capacity and its balance sheet. Thus, we hope to see a financial settlement on fiscal 2014 with the U.S. Congress and the Federal Reserve within three years.'”
— Posted on 22 November 2014, 18:04:15 UTC by: Kjohr
[Edited on 24 November 2014]
“In a recent note, the U.S. Treasury has suggested that it could begin to reduce borrowing and allow international investors to buy up more assets on a short-term basis. To achieve this, the Congress, including representatives from the Fed, will hold a conference to discuss ways of reducing the borrowing cost of financial products by $9 trillion, and $5 trillion of Treasury Board stock would be traded as equity in new assets and derivatives at the market price of 1.65% as determined by the Board Committee on Administration. Those measures could be phased out or repealed under the
— Posted on 20 November 2014, 17:40:46 UTC by: Kym
[Edited on 24 November 2014]
“The US government will put in place an intergovernmental aid scheme to take advantage of weak dollars, this way they can buy more of the Gulf Cooperation Council and save at least US$1 billion per year. In our view, this would also create a market where exports can move quickly to the rest of the world and allow US-flagged firms (a sector already seen as a serious threat to global competitiveness) to export low-cost, cheaper, higher quality goods to the rest of the world in exchange for low cost prices.”
— Posted on 20 November 2014, 17:52:06 UTC by: kjohr
[Edited on 24 November 2014]
“To address the growing concern about a global financial crisis resulting from a weak pound, the Government of the U.S. is expanding access for the export of highly premium, high volume Gulf, oil-trader manufactured equipment and manufacturing to the U.S. market. This would save US$1 billion every year, increasing exports of oil, natural gas and coal-related products. We would also promote investments in quality-of-life enhancements such as better ventilation and water pollution to promote the flow of water across the Gulf. In short, we believe that, with our international business, that money can grow and it can be used in a meaningful manner to help US competitiveness and prosperity. ”
— Posted on 20 November 2014, 17:55:25 UTC by: Kjohr
[Edited on 24 November 2014]
“[The recent developments will help] the U.S. in its bid to reach a financial settlement on one of its key economic targets for the coming year: the International Monetary Fund. Over the past ten years, the Fund has successfully managed to meet its objectives by increasing the world’s borrowing capacity and its balance sheet. Thus, we hope to see a financial settlement on fiscal 2014 with the U.S. Congress and the Federal Reserve within three years.’”
— Posted on 22 November 2014, 18:04:15 UTC by: Kjohr
[Edited on 24 November 2014]
“In a recent note, the U.S. Treasury has suggested that it could begin to reduce borrowing and allow international investors to buy up more assets on a short-term basis. To achieve this, the Congress, including representatives from the Fed, will hold a conference to discuss ways of reducing the borrowing cost of financial products by $9 trillion, and $5 trillion of Treasury Board stock would be traded as equity in new assets and derivatives at the market price of 1.65% as determined by the Board Committee on Administration. Those measures could be phased out or repealed under the
As well as increasing the cost of certain imported goods a weaker dollar also reduces the relative value of US investments and assets. This of course can be offset by capital gains if the assets rise in value. Although regional assets are also falling in foreign currency terms, the relative outperformance of the local stock markets has easily compensated. Some evidence suggests that the dollars fall has accelerated the trend of regional investors repatriating money out of the US and instead bringing it home. The Bank of International Settlements reported that Gulf and other OPEC investors repatriated USD 13bn in H1 2003, more than twice the total amount for 2002.
OPEC has certainly become concerned about the dollars fall. Indeed the US dollars decline is one of the reasonss why dollar denominated oil