Another Gulf Crisis: Dinar Devaluation Looms As Bahrain Begs Neighbors For Bailout

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http://www.zerohedge.com/news/2017-11-01/devaluation-looms-bahrain-begs-richer-neigbors-bailout.......

Another Gulf Crisis: Dinar Devaluation Looms As Bahrain Begs Neighbors For Bailout

 

 

by Tyler Durden

Nov 1, 2017 7:30 PM

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Despite the recent rise in oil prices, all is not well among the allies in the Gulf. The 'pegged-to-the-dollar' Bharaini Dinar has tumbled in the last few days as Bloomberg reports the nation has asked Gulf Arab allies for financial assistance as it seeks to replenish its foreign-exchange reserves and avert a currency devaluation - which could spread contagiously through MidEast markets.

Bloomber notes that the slump in oil prices has battered the six-member Gulf Cooperation Council, at times raising questions over whether a dollar peg seen as a bedrock for economic stability for more than three decades was sustainable. And while bets against the region’s currencies have subsided this year, a devaluation of a GCC member would risk shifting the attention to others. Gulf central banks, including Bahrain’s, have repeatedly brushed aside talk of abandoning their exchange-rate regimes.

But Bahrain has seen its central bank's foreign reserves collapse over 75% from 2014 highs as they have defended the currency peg.

And so, as Bloomberg reports, according to people with knowledge of the talks, Bahrain has asked for a bailout.

 

 

The request was made to Saudi Arabia and the United Arab Emirates, two of the people said.

 

A third person said Kuwait was also asked.

 

The countries responded by requesting the island kingdom do more to bring its finances under control in return for the money, the people said on condition of anonymity because the discussions were private.

 

The talks are at an early stage, one person said.

It appears the FX markets are not convinced as the Dinar tumbled...

The IMF estimates that Bahrain needs oil prices at $99 a barrel to balance its budget this year, compared with $73.1 a barrel for Saudi Arabia, which is overhauling its economy.

While Brent crude is trading at the highest level in more than two years, it’s still almost $40 below Bahrain’s breakeven price.

But, Bloomberg points out that economists say that a Saudi-led bailout of Bahrain will be less costly than cleaning up the mess of a devaluation.

 

 

“Most people are fully expecting the other Gulf countries to come to Bahrain’s aid,” said Jason Tuvey, a London-based economist at Capital Economics....

Will this be the next ripple to spook markets? Or just another dip to buy?.

 

 

 

 

 

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Qatar investigates UAE plan to devalue its currency

5 hours ago

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The Intercept leaks also hint towards a plan to strip Qatar of the football World Cup 2022 [Karim Jaafar/AFP/Getty Images]

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Qatar has opened an investigation into claims of an alleged plot by the UAE to weaken its currency in the early stages of the Gulf diplomatic crisis, according to a government spokesman.

Qatar was alerted to the issue in July and re-examined it following recent media reports, said Sheikh Saif bin Ahmed Al Thani, director of the government communications office, on Sunday. 

US-based investigative news website The Intercept revealed on Thursday that a plan for the UAE to manipulate Qatar's economy and strip the country of the 2022 football World Cup was found in the email account of Yousef-al-Otaiba, the UAE ambassador to the US.

READ MORE

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"The Qatari government, through its various entities, including the central bank, is working on confirming and identifying these reports," Al Thani told AFP news agency. 

He added that an unnamed financial institution stopped trading in Qatari Riyals "for a few days" and only resumed after "we reached out to them".

"If this financial warfare is true, it is disgraceful and dangerous not only to Qatar's economy, but the global economy." 

The Intercept said it had received the information from the Global Leaks company.

The plan to weaken the Qatari economy was prepared by Banque Havilland, a Luxembourg-based bank.

The latest leak adds to a long list of revelations from Otaiba's inbox and comes as tension in the Gulf enters its sixth month. 

In June, Bahrain, Saudi Arabia, the UAE and Egypt cut off diplomatic ties with Qatar and imposed a land, sea and air blockade after accusing it of supporting terrorism.

Qatar has strongly denied the allegations.

The document obtained by The Intercept further hinted towards a plan to strip Qatar of its role to host the football World Cup 2022.

The UAE would, according to the plan, launch a PR campaign drawing attention to Qatar's financial weakness, making the case that Doha is unable to afford the sporting event.

"They are definitely attacking the hosting of the 2022 World Cup in one way or another, " Al Thani said.

To read the full report in The Intercept, click here.

SOURCE: AL JAZEERA NEWS

 

http://www.aljazeera.com/news/2017/11/qatar-investigates-uae-plan-devalue-currency-171113055727989.html