Saudi Arabia said to order ban on riyal forward products

The Saudi Arabian Monetary Agency (SAMA), the kingdom’s central bank, has ordered banks to stop selling currency services that allow investors to make cheap bets on a devaluation of the riyal, Bloomberg reported, citing five sources familiar with the matter.

Banks were asked not to sell option contracts on riyal forwards at a meeting held on Jan. 18 in Riyadh, sources told Bloomberg, while asking not to be named as the meeting was private. The rules apply to Saudi lenders, as well as international banks operating in the kingdom.

Some traders are betting that Saudi Arabia could forgo its riyal peg to the dollar amid the global economic slowdown and a slump in oil prices. Bets for devaluation reached their highest in almost 20 years this month, Bloomberg reported.

SAMA on Jan. 11 confirmed that it would keep its currency peg at SAR 3.75 per USD, despite concerns over the kingdom’s economy. At the time, the agency attributed the volatility in riyal features to what it called “incorrect perceptions” from some traders in the market, while adding that all fundamentals point to a stable economy.