Qatar banks assert control, cool speculation over riyal

The Qatari riyal rose back to near its peg to the US dollar yesterday as local banks returned from a week-long holiday and dominated the market, cooling speculation that economic sanctions might strain the peg. Last week, with Qatari banks were closed for five days of Eid al-Fitr holidays. Yesterday, however, Qatari banks were back in the market and once more accounting for most activity. The riyal changed hands at 3.6415 in the afternoon, after trading in a range of 3.6371 to 3.7331 earlier in the day.QNB, the Gulf’s biggest listed bank, was providing indicative quotes for the riyal at 3.6405/25, unchanged from levels before the economic blockade on Qatar erupted in early June.“The market is reflecting reality again,” said one Qatari banker, who attributed last week’s low rates for the riyal to poor liquidity among foreign banks as well as speculation.But at onshore banks, not much has changed; the central bank is continuing to provide them with ample supplies of dollars for commercial purposes at a rate of up to 3.6415 under its peg mechanism, commercial bankers said.For many countries, the emergence of a gap between rates quoted by onshore and offshore traders has signalled a severe shortage of foreign currency and an eventual devaluation.Qatar’s case is different. Most of its foreign income comes from oil and gas industries controlled by the government, which can ensure that dollar supplies are remitted home.And the hundreds of billions of dollars in its sovereign wealth fund would cover more than a decade of imports.The Qatar Central Bank republished a statement yesterday saying the riyal’s exchange rate is stable and that it would guarantee all exchange transactions for customers inside and outside the country.