By Dr. Theodore…
Doha / QATAR: Qatar’s one-year currency forwards jumped to a three-year high yesterday and yields rose at a weakly-supported debt auction as foreign investors responded to concerns about Syria by cutting exposure to the Gulf Arab region.
One-year riyal forwards rose as high as 160 points bid yesterday from Wednesday’s close of 115. That suggested a 0.4 percent weakening of the riyal from its peg of 3.64 to the dollar over a one-year period.
“It’s basically tightness of liquidity onshore. Together with what’s happening in the region it also means people would be buying dollars”. Relatively low liquidity in the Qatari forward market exaggerated the market move.
By comparison, Saudi one-year forwards touched 30 points bid yesterday before bouncing back, up from Wednesday’s close of 15 but still below the last week’s peak of 37.
The Qatari Treasury bill auction, conducted on Tuesday with results announced by the central bank (QCB) yesterday, drew demand of just QR4.5bn, barely surpassing the bank’s monthly volume of QR4bn ($1.1bn) for draining excess liquidity.
Yields on the Opec state’s 182-day T-bills increased to 1.15 percent, the highest since October 2012, from 1.04 percent in the previous auction on August 6, while those on 91-day bills rose to a four-month high of 0.87 percent from 0.82 percent. Yields on 273-day notes edged down to 1.22 percent from 1.23 percent last month.
“There is a bit of tightness in the money market. A lot of money is flowing out of the Gulf region”. The central bank has conducted monthly auctions of 91-, 182- and 273-day T-bills since 2011, with the volume of funds drained through the sales staying unchanged.
The QCB plans to sell another QR4bn in three and five-year local currency government bonds and sukuk on September 10 in a quarterly issue it allocates directly to banks, it also said yesterday. Many traders said that demand might be higher than in the T-bill sale because the paper was longer-dated.
Sources: QCB, Reuters, The Peninsula, Gulf Times, QNB, Caye Global News
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