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Qatar Currency Manipulation

The ongoing Gulf crisis instead of being resolved are becoming more complex with new issues surfacing on the horizon. Qatar already made it clear earlier that the blockade which is veiled as a diplomatic crisis is a veiled economic warfare.

Qatar has further enhanced its argument of economic sabotage by alleging rival Gulf countries attacking its currency through “blatant, unlawful market manipulation,” in the letter which was sent to global regulators including Securities and Exchange Commission, regulators in the U.K. and Luxembourg.

Qatar stated that the manipulation of its currency is a well-planned economic attack waged to target its bonds and a well-coordinated scheme to extract funds from the Banks of Qatar creating shortage of liquidity.

Qatar Central Bank also showed a considerable outflow of funds from its financial system after the diplomatic standoff began.

The crisis has already imposed a pressure on Qatar’s financial system.as per reports, Fitch Ratings in August downgraded Qatar’s credit rating to AA- from AA because of geopolitical risks related to the diplomatic standoff, which it said was “unlikely to be resolved for some time.”

Qatar’s Finance Minister Ali Al Emadi expressed his concern to Wall Street Journal in November, about the financial drain and stated that Qatari authorities were investigating possible manipulation of its currency. He stated that “These tactics are not only unethical, but they give misleading information for international investors…about how the economy is doing.”

Possibly, Qatari authorities found a connection to the manipulation of currency when a presentation made by employee of Banque Havilland—a private wealth bank in Luxembourg with clients in the Persian Gulf—emerged on the internet last November.

The presentation was worrisome as it explained about the financial weapons that can be used to create pressure on Qatar to release money for protecting its currency that will be affecting by a purposeful targeting of its bonds.

The presentation entitled “Control the Yield Curve, Decide the Future,” was distributed by a group called “Global leaks” , who also sent journalist stolen emails from account of Yousef Al Otaiba, the U.A.E.’s ambassador to the U.S.

Though the group has completely denied to identify its members and source of information, it stated last year that it functions on the lines to “expose corruption, financial frauds which are done by rich governments.”

Banque Havilland is still silent on the allegation levied by Qatar but denied any kind of “improper conduct” and its “intend to execute any of the transactions on financial instruments” as stated in the presentation.

In the letters written to the global regulators Qatar’s lawyers has asked to “examine the extraordinary conduct of Banque Havilland” for devising “a plan to engage in financial warfare against Qatar.”  They have also provided details of certain suspicious market moments that can only be caused in an attempt to manipulate the financial market.

Apparently, the case suggests that there is a planned economic attack on the economic institutions of Qatar by manufacturing and spreading pathetic image about Qatar’s economy with the aim to economically pull down one of the biggest competitor in the region.

 

Alexis Methenitis/Flickr

Photo for illustrative purposes only.

Qatar’s government has spent some $38.5 billion (equivalent to 23 percent of its GDP) to support the economy in just the first two months of the Gulf crisis, a new report has found.

According to ratings agency Moody’s, some $30 billion has also left Qatar’s banks during the same time period, “with further declines expected as GCC banks opt not to roll over their deposits.”

In a report released this week, the agency said that the dispute is increasing uncertainty in the region and could spur negative credit outlooks for all GCC nations.

Arshad Inamdar/Flickr

Photo for illustrative purposes only.

Moody’s added that amid the “unprecedented” dispute, Qatar and Bahrain face the biggest financial risks.

The blockade of Qatar has particularly hurt its trade, tourism and banking sectors, the report said.

“Qatar’s future credit trajectory will depend heavily on the evolution of the dispute,” it added.

Bahrain ‘exposed’

Qatar isn’t the only country reeling from the Gulf dispute.

Bahrain, which has been weakened by civil unrest since 2011, has seen climbing debt put pressure on its financing costs.

“The broad-based deterioration of Bahrain’s credit profile and its diminished shock absorption capacity makes it susceptible to any reassessment of risk by foreign investors,” Moody’s said.

Because the country is currently aligned with Saudi Arabia and the UAE, it may have some support to mitigate its risk. But details about how remain unclear, the report said.

‘Impaired functioning’

It’s been more than 100 days since Saudi Arabia, the UAE, Bahrain and Egypt cut diplomatic and economic ties with Qatar.

Hopes were briefly raised about the Emir and Saudi’s Crown Prince spoke on the phone last week for the first time about the crisis.

WAM

Flags of the boycotting nations (UAE, Saudi Arabia, Bahrain and Egypt).

But Saudi Arabia broke off communications shortly after that for a protocol dispute.

Authorities from all countries have previously said the dispute could go on for months or even years.

But such a case would be bad news for the region’s finances, Moody’s said.

“The tensions highlight intra-GCC divisions, and although Moody’s believes that a realignment within the GCC is unlikely, the diplomatic rift will inevitably impair the functioning of the grouping, the more so the longer it persists,” the report concluded.

Thoughts?

Neha Rashid / Doha News

Photo for illustrative purposes only.

US dollars are in short supply at many foreign exchange houses in Qatar, due to increased customer demand and disrupted shipments, employees said.

Last week, the UAE, Saudi Arabia and Bahrain severed diplomatic ties with Qatar and closed their air, land and sea borders with the neighboring peninsula state.

The uncertainty over the situation has spurred some residents to exchange their riyals for US dollars in recent days.

Doha News

No dollars at currency exchange in Doha’s Landmark Mall

This, combined with disrupted transportation to Qatar, has left some currency exchange centers with little or no stock of USD.

To mitigate the problem, some houses are imposing limits on the amount of dollars individuals can exchange.

No cause for concern

The run on US dollars appears to have been a knee-jerk reaction by some residents to the past week’s events.

Omar Chatriwala / Doha News

Photo for illustrative purposes only.

However, Qatar’s Riyal has been pegged at around 3.64 to the dollar for years and analysts say this is unlikely to change.

Even if the situation deteriorates, Qatar can use its massive reserves of foreign assets to support their currency.

Additionally, Qatar’s Finance Minister said in an interview with CNBC yesterday that there is no reason for concern, and that he was “extremely comfortable” with the country’s economic position.

Out of stock

Doha News spoke to 11 branches of seven different exchange companies across the city about their stock of US currency this week.

Seven outlets had no dollars, including Trust Exchange in Al Messila, Al Jazeera Exchange in Al Sadd and in Bin Mahmoud, and the City Exchange in Bin Mahmoud.

Al Mana Exchange in Al Muntazah was also out of all currency, a staffer told Doha News.

photosteve101/Flickr

Photo for illustrative purposes only.

“We have no stock, and we’re not getting anything tomorrow. There’s no availability in the market,” he said.

Meanwhile, long queues could be seen this week outside the Landmark Mall branch of Al Dar Exchange Works, as residents sought to send money to families back home.

This is not unusual given summer and Eid holidays are when many people travel.

But one of the booths had posted a sign advising customer that it had no dollars for exchange.

In comparison, all the exchanges had a good supply of Euros and UK pounds. And there were no limits for customers exchanging to these currencies, staff said.

Limited transactions

Three exchanges said they had small amounts and were limiting customers to between $500 and $2,000 per person. Just one said it had an adequate supply of dollars.

Neha Rashid / Doha News

Photo for illustrative purposes only.

Al Zaman Exchange in Al Mamoura had a limited supply of dollars, and customers were only allowed up to $500 per person, a dealer there said.

Meanwhile, a staffer at the Qatar-UAE Exchange in City Center mall said they were limiting customers to $2,000 per person.

“Lots of people have come in recently wanting dollars – they’re taking all our stock,” the dealer said.

The Qatar-UAE Exchange branch on Airport Road also had a small supply, and was imposing a $1,000 limit per customer.

“You should come early, as we will run out, and we don’t know when we will get more in. Maybe tomorrow, Insha’Allah (God-willing),” an employee said.

The Dar Al Salam mall branch of the same exchange company had no dollars and an employee there said they did not know when they might get more.

Patrick Gage/Flickr

Photo for illustrative purposes only.

Speaking to Reuters this week, the president of UAE Exchange, which has 10 branches in Qatar, said that his firm hadn’t seen any major change in remittance volumes due to diplomatic tensions.

However, Sudhir Kumar Shetty added that the dollar supply was not meeting demand in Qatar, partly due to flows of the US currency from other Gulf countries being disrupted.

“Everywhere, all the banks and exchange houses, there are no dollars. All the exchange houses are trying to get currencies from other countries,” he said, adding that his firm was hoping for a shipment from Hong Kong.

No limits

Notably, the shortage does not appear to have affected all exchange houses.

Residents who need to stock up on dollars ahead of their summer travels may have better luck waiting until they arrive at the airport.

Hamad International Airport

Sanjiban Ghosh/Flickr

Hamad International Airport

Travelex branches airside and landside at Hamad International Airport (HIA) had dollars in stock.

And they are not imposing any exchange limits on customers, an employee told Doha News.

Have you had any trouble changing your money? Thoughts?

Note: Stock levels at money houses change frequently and residents who wish to change currency should call ahead to confirm availability.