{"id":16147,"date":"2016-01-07T11:55:23","date_gmt":"2016-01-07T16:55:23","guid":{"rendered":"http:\/\/olduvai.ca\/?p=16147"},"modified":"2016-01-07T11:55:23","modified_gmt":"2016-01-07T16:55:23","slug":"petro-currencies-under-fire-as-oil-keeps-sliding","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=16147","title":{"rendered":"Petro Currencies Under Fire As Oil Keeps Sliding"},"content":{"rendered":"

Petro Currencies Under Fire As Oil Keeps Sliding<\/a><\/h3>\n
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Low oil prices put pressure on the budgets of major oil producing countries in 2015, but the next domino to fall could be their currencies.<\/div>\n
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Petro-economies with flexible exchange rates have already seen double-digit declines in the value of their currencies over the past year, in percentage terms. But with crude now at 11-year lows, pressure is also mounting on a range of currency pegs. The futures contract for the value of the Saudi riyal, which has been pegged to the dollar for three decades, hit a\u00a016-year low<\/a>. While Saudi Arabia has no plans to ditch its currency peg, at least officially, the markets are starting to bet that the country won\u2019t be able to maintain the peg due to budgetary pressures and dwindling foreign exchange reserves.<\/p>\n

Low oil prices have blown a massive hole in the Saudi budget. For now, Saudi Arabia has chosen a path of\u00a0austerity<\/a>\u00a0in order to try to address the problem. It revealed a\u00a0budget<\/a>\u00a0that calls for reforming fuel subsidies, raising taxes, and lower spending. But for a government that is keen to maintain social stability, slashing public expenditures is not really something it can lean on too much.<\/p>\n

Related:\u00a0BP\u2019s CEO Finally Sees Oil Prices Bottoming Out<\/strong><\/a><\/p>\n

With its oil market strategy a priority at the moment, ruling out an effort to significantly increase oil prices through production cuts, the only other option to fix its budget deficit is to abandon its currency peg. The Saudi riyal has been pegged at 3.75 to 1 U.S. dollar, but the futures market sees one-year contracts at 3.82, a 16-year high. Commerzbank AG says the peg is no longer sustainable. \u201cMarkets clearly no longer believe that the USD-SAR peg is durable,\u201d Peter Kinsella, an analyst at Commerzbank,\u00a0concluded<\/a>. \u201cIf they did, then forwards would not diverge from spot prices to any large extent.\u201d<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Petro Currencies Under Fire As Oil Keeps Sliding Low oil prices put pressure on the budgets of major oil producing countries in 2015, but the next domino to fall could be their currencies. Petro-economies with flexible exchange rates have already seen double-digit declines in the value of their currencies over the past year, in percentage […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2,3],"tags":[6010,2245,1775,5332,7825,701],"class_list":["post-16147","post","type-post","status-publish","format-standard","hentry","category-economics","category-energy-2","tag-nick-cunningham","tag-oil-market","tag-oil-price-collapse","tag-oilprice-com","tag-petro-currency","tag-saudi-arabia"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/16147","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=16147"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/16147\/revisions"}],"predecessor-version":[{"id":16148,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/16147\/revisions\/16148"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=16147"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=16147"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=16147"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}