Wednesday, May 18, 2016

Is Saudi riyal about to blow? Are you short?

Saudi riyal crash

There was a story posted on Zerohedge and Tom Hickey posted it here about how Saudi Arabia is now either contemplating or starting to pay contractors with IOU's.

Either or, it's a sign that there could be a full blown dollar liquidity crisis brewing there.

As you know the Saudi's peg their currency--the riyal--to the dollar at $3.75. That costs reserves and while they have quite a lot of reserves they also need that for servicing dollar denominated debt, which has skyrocketed in the past two years.

And we all know that oil prices are way low.

So the question is, will this put pressure on the Saudi's to abandon the dollar peg? If so, the riyal will collapse.

I am short a small riyal position and I have been for a while. You can short it on Oanda and it just so happens that I teach my Forex course on Oanda.

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1 comment:

Seve141 said...

What will happen to the Saudi's war effort in Yemen?

Giving out IOU's to the house of Saud's mercenaries in lieu of cash has to be a no go.

Even Daesh / ISIS doesn't stiff their jihadists.