الرئيسية
JEDDAH: Although the current currency volatility may bring
some uncertainty for importers and exporters, the Kingdom has the
necessary foreign assets to tackle any negative impact from the
deepening debt crisis in Europe and the US, Saudi-based analysts said on
Tuesday.
Their remarks came as Western economists speculated
over whether the euro has a future 10 years after its birth, as fears
grew over contagion from the euro zone sovereign debt crisis.
As
fears grew over a possible currency war in some key markets, the Indian
rupee fell to an all-time low Tuesday as oil refiners and other
companies scrambled to buy dollars.
Jarmo T. Kotilaine, chief
economist at the National Commercial Bank, said the main risk for Saudi
Arabia about the currency volatility comes from a number of key oil
export markets taking a hit because of the eroding purchasing power of
their currencies.
This would weaken global oil demand in relative
terms, although it should be remembered that the market still looks
quite tight, he said.
Financial analyst Salahuldean Khashoggi
stressed that he did not believe Saudi trade would be impacted by any
turbulence of euro as more than 80 percent of the global trade is using
US dollar.
But he said a US debt crisis will flip the world
upside down. It will definitely take the global economy into a double
dip recession, maybe worse than the one in the 1930s.
The Saudi banking system has a very limited exposure to European debt, he pointed out.
Spanish
and Italian bond yields shot higher again on Tuesday, underlying the
deep strains on euro zone economies, as stock markets inched up
following a pounding the previous day.
Commenting on the latest
market developments, Khan H. Zahid, vice president and chief economist
at Riyad Capital, said the euro has been volatile in recent months,
strengthening against the dollar and weakening at various times.
"Such
volatility increases the cost of doing business and investments (e.g.,
hedging against currency fluctuations) and thus act as a damper," he
added.
"In addition, when the euro falls against the dollar, as
in recent weeks, it increases Saudi imports from euro zone and reduces
exports because euro zone goods become cheaper," he said.
Commenting
further on the debt crisis fallout, Kotilaine said: "In any market,
uncertainty is a negative influence. It tends to cause people to delay
consumption and investment decisions or to manage their risks through
hedging which is costly and reduces the level of activity by increasing
its price. The great risk linked to the situation in Europe is a sharp
and sustained drop in the value of the euro below the current levels.
This would obviously increase the euro price of dollar-denominated
products such as oil and would begin to erode demand."
On a worst
case shock, he said a bout of euro weakness could produce a significant
supply shock to the fragile European economy. These effects tend to be
only very partially mitigated by long-term contracts.
some uncertainty for importers and exporters, the Kingdom has the
necessary foreign assets to tackle any negative impact from the
deepening debt crisis in Europe and the US, Saudi-based analysts said on
Tuesday.
Their remarks came as Western economists speculated
over whether the euro has a future 10 years after its birth, as fears
grew over contagion from the euro zone sovereign debt crisis.
As
fears grew over a possible currency war in some key markets, the Indian
rupee fell to an all-time low Tuesday as oil refiners and other
companies scrambled to buy dollars.
Jarmo T. Kotilaine, chief
economist at the National Commercial Bank, said the main risk for Saudi
Arabia about the currency volatility comes from a number of key oil
export markets taking a hit because of the eroding purchasing power of
their currencies.
This would weaken global oil demand in relative
terms, although it should be remembered that the market still looks
quite tight, he said.
Financial analyst Salahuldean Khashoggi
stressed that he did not believe Saudi trade would be impacted by any
turbulence of euro as more than 80 percent of the global trade is using
US dollar.
But he said a US debt crisis will flip the world
upside down. It will definitely take the global economy into a double
dip recession, maybe worse than the one in the 1930s.
The Saudi banking system has a very limited exposure to European debt, he pointed out.
Spanish
and Italian bond yields shot higher again on Tuesday, underlying the
deep strains on euro zone economies, as stock markets inched up
following a pounding the previous day.
Commenting on the latest
market developments, Khan H. Zahid, vice president and chief economist
at Riyad Capital, said the euro has been volatile in recent months,
strengthening against the dollar and weakening at various times.
"Such
volatility increases the cost of doing business and investments (e.g.,
hedging against currency fluctuations) and thus act as a damper," he
added.
"In addition, when the euro falls against the dollar, as
in recent weeks, it increases Saudi imports from euro zone and reduces
exports because euro zone goods become cheaper," he said.
Commenting
further on the debt crisis fallout, Kotilaine said: "In any market,
uncertainty is a negative influence. It tends to cause people to delay
consumption and investment decisions or to manage their risks through
hedging which is costly and reduces the level of activity by increasing
its price. The great risk linked to the situation in Europe is a sharp
and sustained drop in the value of the euro below the current levels.
This would obviously increase the euro price of dollar-denominated
products such as oil and would begin to erode demand."
On a worst
case shock, he said a bout of euro weakness could produce a significant
supply shock to the fragile European economy. These effects tend to be
only very partially mitigated by long-term contracts.