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Moody's Sees Gulf State Currency Pegs Withstanding Oil Rout

  • Gulf states to post $250 billion budget deficit in two years
  • Costs of depegging would outweigh benefits, agency says
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Oil-rich countries in the Gulf Cooperation Council are unlikely to abandon their decades-old currency pegs to the U.S. dollar even as a slump in oil prices puts a $250 billion squeeze on the region’s finances, according to Moody’s Investors Service.

"The GCC’s large foreign-currency reserves provide ample room to maintain pegged exchange-rate regimes for several years, even in an adverse oil price scenario," senior analyst Mathias Angonin said at a press briefing in Dubai on Monday. "Changes to the current exchange-rate regimes are unlikely because the costs associated with one-off devaluations would outweigh the benefits."