Home » wire - Saudi urged to cut investment in US

11/08/2011 02:26:10 PM GMT   Comments ()     Add a comment   Print     E-mail to friend

 [Emirates 24/7] Saudi Arabia should cut its investment in US bonds to protect its overseas assets of nearly $492 billion, following the credit downgrade of the US given the Gulf Kingdom’s heavy reliance on the US market, National Commercial Bank (NCB) said. Besides the impact of the downgrade on Saudi foreign assets, the problem could also have indirect effects on Saudi Arabia by depressing oil prices -on the grounds that the US is the world’s largest oil consumer - and the value of the US dollar, to which the Saudi currency, the riyal, is pegged, it study showed. NCB described the downgrade as actually more of a referendum on the dollar rather than US treasuries, due to the fact that US ability to pay its debt obligations remains a “fundamental certainty”. “However, the value of those payments will essentially decline, given the fact that with more dollars in circulation due to the printing presses, the value of each dollar by definition declines, since the Kingdom is keeping much more than enough to maintain the peg of the riyal to the US dollar, it is advisable that the Kingdom should opt for diversifying future excess revenues away from US treasuries into other real assets across different currencies and regions.” In addition, recent concerns that Europe’s debt crisis could spread to Italy, the Euro-zone’s third-largest economy, accentuated fears of a vicious new global economic downturn, it added. omar1.1

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