Back home when I was there recently, the US Dollar was going close to RM3.2. It was 3.6 when I was there back in August!
Now, apart from bitching about the rising price of crude, people are talking about the weakening US dollar especially in this region. Most GCC currencies, except Kuwait, are loyally peg to US Dollar. And seriously I don’t know why GCC are contemplating about dropping the policy. There have been numerous talks about it over past few months.
OK fine, may be there are some recompense there – a plunging dollar could boost the industrial, tourism and real estate sectors but seriously, other than these, I could not think of anything else positive about it. Heck likewise, it make some imports more expansive too.
As an expatriate, feeling a pinch due to the weakening US dollar is an underestimate, it is more like a kick in my ass. Our RM is appreciating, Oman Riyal is sliding as it is peg to US Dollar and inflation in Oman is going crazy. Before I know it, my pay check is shrinking by days!!
Kuwait has dropped its currency peg last May, and since then the Dinar has well appreciated more than 30%. Good for them. But Oman, Saudi, UAE and Bahrain at that time indicated their reluctance to follow Kuwait.. damnit!.
But now, UAE, Qatar and Saudi are talking. I heard the UAE or Qatar may drop their currencies’ pegs may be within this six months as inflationary pressures seem to outweigh the benefits of maintaining the links. Saudi would also consider revaluing the riyal with other GCC oil producers. Not a thing from Oman yet, but we’ll see.
Apparently, these GCC countries are now receiving strong pressure from all sectors because of higher inflation and an expected further deterioration in the dollar. What they are saying or realizing now, the US regulators are really taking decisions that suit the economic conditions in the United States, which are not necessarily suitable for our economic conditions.