Saudis told to prop up currency amid global devaluation war fears


By Mehreen Khan
The Telegraph, London
Sunday, January 10, 2016

Saudi Arabia should use its massive foreign exchange reserves to defend the riyal amid fears the world is descending into a new phase of global currency wars, the World Bank has said.

The kingdom's shaky currency peg with the dollar has come under record pressure this week as the price of oil has plummeted to near 12-year lows at $32-a-barrel.

With the global stock markets in turmoil, analysts fear a Saudi devaluation could spark a new wave of deflation and competitive "beggar-thy-neighbour" policies in a fragile global economy.

But the world's largest producer of Brent crude should continue to defend its exchange rate by drawing down on its war chest of reserves, according to Franziksa Ohnsorge, lead economist at the World Bank. ...

... For the remainder of the report:


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