Shifting Pegs

摘要

For decades the fixed exchange rate between Gulf currencies, led by the Saudi riyal, and the U.S. dollar has been one of the surest bets in global markets. The arrangement is a financial quid pro quo for the defense guarantees that Washington provides to the House of Saud and its oil-rich neighbors. But mounting inflation pressures in the region are spurring calls to abandon the peg and fueling market speculation that a potentially momentous change could be in the works. Talk of currency reform has spread across the region since Kuwait shifted its peg from the dollar to a basket of currencies in May 2007. The dollar's decline over the following year has intensified the debate in the other Gulf Cooperation Council countries: Saudi Arabia, the United Arab Emirates, Oman, Qatar and Bahrain.