Bloomberg reports that
Saudi Arabian regulators are probing bank currency trades as the
nation's currency peg comes under strain.
The monetary agency is seeking details on banks' forward contracts and warning them about structured products.
"The
Saudi Arabia Monetary Agency has asked lenders to explain why they are
offering dollar-riyal forward structured products to customers less than
four months after the regulator banned options contracts that let
speculators place wagers on a currency devaluation, the people said,"
Bloomberg reports.
Sounds like a bit of a panic move. Riyal 12 month forwards rose 590 points today in the biggest jump since Feb.
The story says the officials want transaction details from all banks on structured product trades dating back to Jan 18.
The
Saudi Arabian riyal has a hard peg to the US dollar but given that it's
a petrocurrency, betting on a break is a big trade and a hedge fund
favorite.
Rumors like this can spark a run on a currency as locals buy up US dollars and exacerbate the problem.
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