Why GCC pegged exchange rate regimes will remain in place – Saudi Gazette

Why GCC pegged exchange rate regimes will remain in place – Saudi Gazette

The countries' exchange rate pegs against the US dollar - or in the case of Kuwait to an undisclosed currency basket believed to be dominated by the US dollar - are longstanding and have lent the GCC monetary policy credibility over the decades.A key assumption that continues to underpin our ratings on GCC sovereigns is that their pegged exchange rates are likely to remain in place.. We view all GCC sovereigns as having sufficient access to foreign currency assets, or external financial support, to meet pressures on their exchange rates.. To assess the capacity of GCC sovereigns to defend their currencies and for their exchange rate pegs to remain in place, we have used relatively conservative measures.. We expect that GCC sovereigns would use their liquid external assets to support their economies in times of financial distress, including in defense of their currency pegs.. We do not view Bahrain, on its own, as having sufficient foreign currency resources to meet potential pressures on its exchange rate.. We expect the Bahraini peg to remain in place because we continue to factor further GCC financial support to Bahrain should financial pressures mount, on the exchange rate peg, or otherwise.. We believe that