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Saudi Arabia Says Dollar Must Fall 30% Before It Will Revalue

By Will McSheehy

Jan. 23 (Bloomberg) -- Saudi Arabia, the world's biggest oil producer, won't consider abandoning the riyal's peg to the dollar unless the U.S. currency loses almost a third of its value.

``If the composition of our exports and imports change and there's a precipitous decline in the dollar, we'd look at'' revaluation, Muhammad al-Jasser, Vice-Governor of the Saudi Arabian Monetary Agency, or SAMA, said in an interview in Davos, Switzerland today. Such a drop would have to be about 30 percent, he said.

Gulf states are under pressure to revalue their currencies or drop their pegs after the dollar depreciated more than 8 percent last year on a trade-weighted basis, its fifth decline in six years. A weakening dollar has raised the cost of the region's imports, pushing inflation to record levels.

SAMA Governor Hamad al-Sayyari said as recently as Sept. 26 that Saudi Arabia has no plans to change the riyal's relationship to the dollar.

A significant change in the dollar's value and Saudi Arabia's trade balance is ``unlikely,'' al-Jasser said today.

To contact the reporter on this story: Will McSheehy in Davos, Switzerland at [e-mail]
Last Updated: January 23, 2008 13:41 EST

http://www.bloomberg.com/apps/news?pid=20601104&sid=a0oIn7bBqIBs&refer=mideast