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The Saudi Riyal, UAE Dirham, Bahraini Dinar, and Qatari Riyal have all been fixed to the dollar for decades. Here is why β and what it means for your money.
A pegged (or fixed) exchange rate is one where a government or central bank sets an official rate against another currency and commits to maintaining it. Unlike free-floating currencies that change every second, pegged currencies stay within a very tight band β often for years or decades.
Gulf economies export oil and gas, which are priced in US dollars globally. Pegging their currencies to the dollar eliminates exchange rate risk for this core revenue stream. It also makes imports cheaper and more predictable, reduces inflation volatility, and signals monetary stability to foreign investors. The Saudi Riyal has been pegged at 3.75 per dollar since 1986. The UAE Dirham has held 3.6725 since 1997.
To defend a peg, a central bank must hold large foreign currency reserves β mostly US dollars. When its currency faces selling pressure (demand falls), it buys its own currency using those reserves. Gulf countries maintain some of the world's largest sovereign wealth funds, giving them enormous capacity to defend their pegs. Saudi Arabia's SAMA holds over $450 billion in reserves.
For anyone sending money to or from Gulf countries, the peg is a significant advantage. USD/SAR, USD/AED, and USD/BHD rates are effectively fixed β the main cost variable is the spread and fee charged by your transfer provider, not exchange rate risk. This makes Gulf remittance corridors among the most predictable in the world.
Peg breaks do happen β most famously Switzerland's CHF/EUR peg in 2015. For Gulf currencies, a de-pegging is considered very unlikely given oil revenues and reserve levels. However, analysts periodically discuss revaluation (a one-time adjustment of the fixed rate) if oil revenues structurally decline. For everyday users, the current pegs should be treated as permanent for practical planning purposes.
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