Oil slump puts pressure on Gulf states’ currency pegs | Financial Times

Oil slump puts pressure on Gulf states’ currency pegs | Financial Times:

The slump in oil prices this year has prompted some investors to rekindle bets against Gulf nations’ currencies, putting longstanding pegs to the dollar under pressure.

Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates — together, the Gulf Cooperation Council — have kept their currencies glued to the dollar since the 1970s. That has meant mirroring US interest rates and tweaking reserves regularly to keep the pegs in place as a cornerstone of their economies. Previous efforts by hedge funds to bet on a potentially calamitous break have failed, as GCC countries have always shown they have sufficiently huge reserves of dollars to keep the pegs in place.

But some believe this time may be different.

“The precipitous decline in oil prices has reignited apprehensions surrounding the sustainability of FX pegs in the GCC region,” said Ehsan Khoman, head of Middle East and North Africa research and strategy at MUFG Bank in Dubai.