De Dollar Hegemonie 40

'Saudi state bank urges govt to cut dollar exposure

Reuters

By Souhail Karam

RIYADH, Jan 12 (Reuters) - Saudi Arabia's largest state bank urged the
government to reduce the kingdom's exposure to the dolllar by investing more
assets outside the United states and gradually changing the riyal's peg to
the weak U.S. currency.

National Commercial Bank, Saudi Arabia's biggest by assets, said the world's
largest oil exporter should set up a sovereign wealth fund to invest surplus
revenues, now partly managed by the central bank, which has $285 billion in
foreign assets.

The bank's statement, prepared by its chief economist, is the latest sign of
pressure on the government to review exchange rate policy for the first time
since 1986. The central bank and officials have repeatedly ruled out any
policy shift.

"Time has come to reconsider the continued pegging of the Saudi riyal to
U.S. dollar, provided that this is done gradually, taking into account the
unfavourable impact on official reserves, which are mostly denominated in
dollars," said Said al-Shaikh, National Commercial's chief economist.

The government should set up a sovereign fund to "increase the returns on
investment of most government surpluses, which are currently invested in
U.S. Treasury bonds", Shaikh said.

The kingdom should "diversify government investments across asset types,
countries and different currencies...to reduce risks and increase
profitability," he said.

Concerns that state investors, including those in Gulf oil exporters would
shift assets away from the dollar helped drive the U.S. unit to record lows
on global markets last year.

Saudi Arabia's neighbours are reducing dollar exposure.

Qatar's $60 billion sovereign fund cut its exposure to the dollar by more
than half over the last two years, the country's prime minister said last
year.'

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