Saudi Riyal Hits Two Year Low On Jamal Khashoggi’s Disappearance

Saudi Riyal Hits Two Year Low On Jamal Khashoggi’s Disappearance
October 16, 2018

 

Saudi Arabia’s currency touched its two year low, and its global bond prices plunged on Monday on concerns that overseas investment could contract as Riyadh faces considerable pressure over the vanishing of journalist Jamal Khashoggi. Following the increasing pressure on the Middle-east kingdom, the riyal traded at 3.7524 to the US dollar in the spot market, its lowest rate since September 2016, according to data provided by Refinitiv.

 

The mysterious disappearance of Khashoggi & miscalculation by Saudi Arabia

Khashoggi, the well-known Saudi reporter and critic of the government, has disappeared after going to the Saudi consulate in Istanbul for a meeting that he had arranged to acquire wedding documents. Turkish officials are considering that he might have been murdered at the consulate – an accusation denied by Saudi Arabia, who claims Khashoggi left on the same day he arrived. Khashoggi was in frequent contact with Saudi government authorities in 2017 about taking a proactive role in the Kingdom, including negotiations over government assistance for a forum that he would head.

Khashoggi did not accept the ideas put forth to him by the key interlocutor, a higher-ranking consultant within the Royal Court. But that conversation came to an abrupt end after Khashoggi turned into a sharp critic of the government, especially it’s domestic policy and handling of Qatar.

Senior Royal Court dignitaries in Riyadh were particularly angered by Khashoggi’s disapproval of the Saudi government’s September 2017 choice to classify Muslim Brotherhood and the Islamic scholar Yusuf al-Qaradawi as terrorists.

In September 2017, for example, Khashoggi wrote an article in the Washington Post, entitled, “Saudi Arabia wasn’t always this repressive. Now it’s unbearable.” According to a Us official who has contact with the intelligence, the US is in possession of voice records of Saudi officials talking about a strategy to entice journalist Jamal Khashoggi back to Saudi Arabia and keep him in custody. However, the official said there is no documented evidence as to whether Khashoggi is dead or alive.

US officials believe that it’s likely the Crown Prince wanted Khashoggi silenced but miscalculated the worldwide impact his sudden disappearance would have.

To clear the air, Bin Salman got in touch with the White House earlier this week, after the media started blaming the royal court for Khashoggi’s murder.

US President Donald Trump is under tremendous pressure over the Khashoggi case. A few days back, a group of senators wrote to the President, demanding action by the White House to find out what happened to Khashoggi and whether sanctions should be imposed on the person or organization responsible for the incident.

The letter, written by the top Republican and Democrat on the Senate Foreign Relations Committee, automatically triggers an inquiry under legislation that permits the President to enforce sanctions on individuals or nations that are considered to have committed a human rights abuse. The White House must reply within 120 days, clearly explaining what actions it is planning to take. While giving an interview to “Fox and Friends,” Trump said his administration was being “very tough” with Saudi Arabia as it examines Khashoggi’s disappearance.

Trump said “We have investigators over there and we’re working with Turkey, and frankly we’re working with Saudi Arabia. We want to find out what happened. We’re probably getting closer than you might think.”

Turkish President Recep Tayyip Erdogan informed reporters yesterday that Turkey “cannot remain silent” on Khashoggi’s disappearance.

Erdogan further said: “We are currently investigating the event in all its dimensions. The event took place in our country. We cannot remain silent in the face of an event like this because it is not a normal occurrence.”

Turkish officials have claimed that a group of 15 men came from Saudi Arabia to Istanbul on the day Khashoggi visited the consulate and were available in the consulate building at the time of the visit by the journalist.

Hatice Cengiz, Khashoggi’s fiancée, believes that media reports of his murder could turn out to be the truth. She has further expressed her intention to wait for the investigation to be finalized.

The developments have created a black mark against Saudi Arabia. Big investors have decided for the dust to settle down before taking investment decisions. JP Morgan Chase Chief Executive, Jamie Dimon, and Ford Motor Company Chairman, Bill Ford, have already canceled a Saudi investor conference.

Likewise, the British billionaire, Richard Branson, Uber CEO, Dara Khosrowshahi, as well as media giants such as Bloomberg and CNN, among others, have all pulled out of the conference.

The financial markets responded to the series of bad news, with the Riyadh’s Tadawul stock exchange losing more than 500 points in the last few days. On Sunday alone, the exchange lost 264 points or roughly 4%. Baring 9 stocks, the rest of the 188 stocks listed in the exchange ended in the red.

Commenting on the selloff, Issam Kassabieh, a financial analyst at Dubai-based firm Menacorp Finance, said “Something this big would definitely spook investors, and Saudi just opened up for foreign direct investment, so that was big. Investors do not feel solid in Saudi yet, so it’s easy for them to take back their funds.”

An opinion post by the general manager of the State-owned Al-Arabiya satellite news network stated that Saudi Arabia could retaliate by decreasing oil production if the US moves ahead in imposing sanctions over Khashoggi’s disappearance.

Turki Aldakhil further said: “If the price of oil reaching $80 angered President Trump, no one should rule out the price jumping to $100, or $200, or even double that figure. The truth is that if Washington imposes sanctions on Riyadh, it will stab its own economy to death, even though it thinks that it is stabbing only Riyadh.”

The United Kingdom, France and Germany have asked Saudi Arabia and Turkey to begin a “credible investigation” into the sudden disappearance of Khashoggi, adding they were looking at the case with “utmost seriousness.”

In a joint statement, the foreign ministers said: “There needs to be a credible investigation to establish the truth about what happened, and – if relevant – to identify those bearing responsibility for the disappearance of Jamal Khashoggi, and ensure that they are held to account.”

The bearish mood affected the exchange rate of Saudi riyal as well. Basically, the central bank maintains a peg of 3.75 riyals to the dollar. The currency is allowed to fluctuate in a range of between 3.7498 and 3.7503. In 2015, when oil prices were declining, the riyal dipped to a low of 3.7598.

Until Saudi Arabia convinces the West that it is not involved in the disappearance of the journalist, the riyal will remain weak.

riyal - technical analysis - 16th October 2018

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Richard W

Richard W

Richard is the guy who know everything there is about the financial industry, working in a top firm for over 15 years, he will give the lowdown on some of the biggest companies in the world


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