Saudi Arabia’s currency fell to its lowest level in two years in Monday's trading as the oil-rich kingdom faces pressure over the disappearance of journalist Jamal Khashoggi in Turkey.
Khashoggi, a U.S. resident, Washington Post columnist and a critic of the Saudi royal family, vanished after entering the Saudi Arabian consulate in Istanbul on October 2.
While the Saudis insisted that he left the consulate safely that day, Turkish officials claimed that he was murdered by a team of Saudi operatives while inside and his body removed.
U.S. President Donald Trump threatened “severe punishment” for Riyadh if the Saudi government is found to have been involved in the Washington Post columnist’s disappearance and alleged killing.
The riyal was quoted by media to have reached 3.7524 to the US dollar in the spot market in early trading, over fears that foreign investment inflows could shrink because of the Khashoggi case, its weakest rate since September 2016.
In the forwards market, the greenback rose as high as 100 points against the riyal, a nine-month high, from 54 points on Friday.
The Saudi Arabian Monetary Authority (SAMA) maintains a peg of 3.75 riyals to the dollar and usually the currency fluctuates in a range of about 3.7498-3.7503.
Historically, the riyal reached an all time high of 3.78 in January of 2009 and a record low of 3.68 in September of 2014.
The Saudi stock market plunged on Sunday because of the journalist's case. The Tadawul All-Shares Index (TASI) index was down 7.0 percent, its biggest drop since December 2014 but it rebounded 2.0 percent on Monday.
Historically, the TASI reached an all time high of 20634.86 in February of 2006 and a record low of 1140.57 in May of 1995.
Saudi Arabia’s international bond prices also slipped. The Khashoggi case has provoked an international outcry against Saudi Arabia, the world’s top oil exporter. Several business leaders and media outlets have pulled out of an upcoming high-profile investment conference in Riyadh dubbed “Davos in the Desert”.
Jason Tuvey, senior emerging markets economist at London-based Capital Economics, told Reuters political developments in Saudi Arabia were becoming an increasingly important economic risk.
Meanwhile, the controversy surrounding Khashoggi remains in focus, with markets concerned about the possible impact it could have on oil prices.
Of note, the International Energy Agency (IEA) in its monthly report released on Friday said that "expensive energy is back … And it poses a threat to economic growth".
"This is due to a weaker economic outlook, trade concerns, higher oil prices and a revision to Chinese data" the organisation warned.