Saudi Arabia has no plan to revalue riyal

Saudi Arabia has no plan to revalue its currency as domestic inflation is low and a Gulf economic bloc commits it to sticking to the fixed exchange rate, the country's central bank chief said on Sunday.
Hamad Saud al-Sayyari, governor of the Saudi Arabian Monetary Agency, also told Reuters in an interview that the central bank does not have to match interest rate changes by the US Federal Reserve and its options are open.
The Saudi riyal currency surged in May after Kuwait revalued its dinar for the first time in 17 months, sparking speculation of regional revaluations across the oil-exporting Gulf region.
"We don't have any plans to change our exchange rate," al-Sayyari said when asked if Saudi Arabia was planning to revalue the riyal. Saudi Arabia, the world's biggest oil exporter, and Kuwait are part of six members of the Gulf Co-operation Council (GCC) economic and political bloc which plans to form a monetary union with a euro zone-style single currency and central bank by 2010.
"Domestic inflation is low. We have an agreement to stay within the established rate and not to change the exchange rate policy until we finish the arrangement for a monetary union," al-Sayyari said on the sidelines of the annual central bankers meeting at the Bank for International Settlements.
"The agreement commits us to stay in the course, with the existing policy until a monetary union is formed. The policy is the fixed exchange rate with the dollar."
The riyal is pegged at 3.75 to the dollar. After the Kuwaiti move it rose to around 3.410 in the interbank market.
OPTIONS OPEN: Saudi Arabia, like the rest of the GCC countries, usually moves its interest rates in step with the Federal Reserve. But earlier this year it did not follow the Fed, raising speculation growing divergence with US policy will force the Saudis to tweak their currency peg.
Al-Sayyari said the central bank has all the options open on interest rates.
"We have our own considerations, policy, our own local developments. We don't have to move exactly to match the (US) move. It depends on the domestic situation," he said.
"We review our situation. Options are open. All the options are always open." The Fed is expected to raise interest rates to 5.25 percent on Thursday.
UNIQUE SURPLUSES: Petrodollars are becoming an increasingly important source of financing for the US trade deficit, which topped $700 billion last year, as oil prices remain at high levels and revenues increase in the Gulf region. Some are calling for the Middle East to address their mounting current account balance of payments surpluses.
Al-Sayyari said the nature of surpluses in the oil-exporting countries and industrial products exporting countries like Japan and Germany were different.
"The difference... is that we are exporting our own reserves. This is a depletable resource, it's not renewable manufactured goods that could be regenerated continuously," he said. "We are exchange our reserves from oil reserves into monetary reserves. We are doing it in response to global needs, not to our own needs."
A senior International Monetary Fund official said earlier this month the IMF is urging Middle East oil exporters to spend more of their record revenues ad help redress trade imbalances threatening the global economy.
A US Treasury paper in March highlighted the scale to which soaring oil prices had boosted current account surpluses in the big crude-exporting nations and exaggerated US deficits. It said oil exporters should help cut those gaps.
At their April meeting in Washington, finance chiefs from the Group of Seven industrial powers also called for shared responsibility for redressing global imbalances.