The value of the Qatari riyal recovered slightly in trading after dipping to a 19-year low on Tuesday morning, but pressure on the currency continued to grow.
The Qatari riyal, which is pegged to the US dollar, rose to US$3.66 on Tuesday afternoon after dipping to an unprecedented US$3.67 in early trading – its lowest level since 1998.
The currency, which is only allowed to fluctuate within a very small range, had fallen from US$3.64 on June 5 when the UAE, Saudi Arabia, Bahrain and Egypt cut off air, sea and land links with the country.
The cost of 12-month forward contracts on the riyal currently stand at 524.55 – more than two-and-a-half times higher than before the crisis started – but also fell slightly from their closing level on Monday.
The move continues to put pressure on the Qatari riyal as analysts worry that government finances could suffer from reduced trade and foreign investors pulling money out of the country.
“There was a big reaction to events a week ago, but over the last few days things have been relatively quiet so we think that the recent slight recovery in the value of the Qatari riyal could be a result of that,” said Mohamad Abu Basha, senior economist at the Egyptian investment bank EFG Hermes.
“In the short term we think Qatar has the resources to fend off some of these pressures. However, the longer these things drag out the harder it will be for Qatar.”
Earlier this week the Qatari finance minister Ali Shareef Al Emadi told CNBC that the country had enough financial muscle to defend the riyal and support its economy if needed.
“We’re business as usual and we’re open for business,” he said in an interview broadcast on Monday.
The situation is intensifying against a background of expatriate workers queuing at money exchange bureaux in an attempt to secure US dollars from a diminishing supply in the country.
“We are still both buying and selling Qatari riyals in our exchange houses in the UAE,” said Mohammad Ali Al Ansari, chairman and managing director of Al Ansari Exchange. “However, the problem is that Qatari riyals are not available in the country in any big quantity.”
“We understand that in Qatar at the moment the exchange houses there are experiencing a shortage of US dollars but I believe that this will only be a temporary situation. Dollars can be imported from Hong Kong or from the Far East quite easily,” he added.
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