The Falling Dollar and Its Impact on the Saudi Economy

Abstract

As foreign exchange studies show, after a fairly strong performance in 2014, the US Dollar (USD) plunged in 2015 in relation to the Euro, British Pound, Japanese Yen, and other global currencies (US Forex 2015). While the trend on US currency fall similarly happened in the past, the weak global confidence now on the US economy has cast serious apprehension on the prospect for any renewed global economic stability. Whenever the USD, as central world currency, declines or appreciates significantly in value, the change impacts the economies of most nations around the world (Amadeo 2015).  One of the countries that stand most vulnerable to any serious and unwanted dysfunction of the USD is Saudi Arabia, which, as a matter of key economic policy, has fixed its currency exchange to Saudi Arabia Riyals (SAR) 3.75 to USD 1.00 since 1986 (Al-Hamidy 2013).  This paper aims at Highlighting the risks of devaluation of the dollar on the Saudi economy There are seven sections in the paper after the introduction. In sections two The changing price of gold and oil in term of USD…; section three The Impacts of fixed exchange rate on the Saudi Economy …;The rationale and implication for the fixed rate,  Policy measures to overcome the risk caused by the depreciation of USD…Possible Policy Options in the Short…, and in the last section Concluding Remarks…