A sharp fall of the riyal against the dollar because of tensions with Iran

BAGHDAD / Obelisk: Saudi riyal record fall sharply against the dollar in the futures market on Monday morning, January 4 2016 after the severance of diplomatic relations between Saudi Arabia and Iran, raising fears of the rising cost of dollar funds of the Kingdom. Futures jumped in front of the riyal to the dollar for the year to 680, approaching the point of the highest level in 16 years, compared with the level of nearly 425 points Thursday 31 December 2015. There is little to move the riyal against the dollar in the spot currency market due to linked to the US currency at 3.75 riyals to the dollar and then banks resort to the futures market to hedge risk area. In the past few months riyal hostel in the futures market to its lowest level since 1999, amid fears that Riyadh in the end be forced to abandon the peg because of the large budget deficit Arabia caused by falling oil prices. It seems that the austerity budget for 2016 announced by Riyadh last week eased those fears but apparently fueled by geopolitical tensions could again. The tense relations between Iran and Saudi Arabia for many years without the presence of a large direct conflict between them and not necessarily that the severance of diplomatic relations has a direct impact on their economies, as linked by trade and investment relations in minimalistic. However, the geopolitical factors may lead the foreign banks and investors to be more cautious in financing at a time when Saudi Arabia Riyadh is considering the borrowing from abroad to ease the pressure on the domestic banking system to finance the budget deficit.