Saudis Show Signs of DecouplingTheir Currency from the Dollar
Prof. de Cecco's editorial primarily focuses on the historic benchmark set my the euro on Thursday when it broke through the psychological barrier of $1.40. There are several reasons for the soaring euro, including actions taken by Saudi Arabia. It it is concerning Saudi Arabia that Prof. de Cecco made three rather shocking revelations.
The first item is that there is rampant inflation in the states along the Arabian Gulf, not due to the rising cost of oil, but to the skyrocketing food prices. The second is that Saudi Arabia, which has traditionally pegged the rial to the dollar, did not follow Ben Bernanke's move and left its interest rate unchanged. For Prof. de Cecco, the Saudi decision is indicative of its desire to decouple from the dollar and peg the rial to the euro. The last item is that Saudi Arabia and Russian have struck a deal to jointly manage OPEC policies.
The article is well worth the read, and I hope to get around to translating it later.