Interbank rates are spiking, the government is paying contractors in IOUs, and foreign currency reserves are being depleted in Saudi Arabia, reports Ambrose Evans Pritchard. While Saudi Arabian markets may not seem of great relevance to Australian investors, the effects this could have on oil prices can’t be ignored. “Societe Generale’s currency team has advised clients to short the Saudi riyal, betting that the country will be forced to ditch its long-standing dollar peg, a move that could set off a cut-throat battle for global share in the oil markets.” Societe Generale aren’t the only ones worried either. “Francisco Blanch, from Bank of America, said a rupture of the peg is this year’s number one “black swan event” and would cause oil prices to collapse to $25 a barrel. Saudi Arabia’s foreign reserves are still falling by $10bn (£6.9bn) a month, despite a switch to bond sales and syndicated loans to help plug the huge budget deficit.” Read the full story: (VIEW LINK)
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