Yemeni rial falls despite central bank injections.
SANAA: Yemen's rial fell further against the US dollar as the central bank pumped $57 million into the exchange market, the latest of a series of cash injections to support the tumbling currency which hit a record low this week.
Nine injections into the market have been unable to stop the continuous fall of the rial this year, which has fallen almost 16 percent from a level of 208 against the dollar mid-January.
The rial fell to 242 rials versus the dollar Sunday, currency traders in Sanaa said, the worst exchange rate of the rial in history. They told Reuters they expected the rial to fall further to 250 rials in the coming week.
The central bank had injected $80 million two weeks ago, but the rial had continued to fall against the dollar. The decision to pump another $57 million announced late Friday has also not seemed to stabilize the rial, an analyst said. "This is at a critical level," said John Sfakianakis of Banque Saudi Fransi in Riyadh.
Sfakianakis said the continuous fall of the rial in 2010 was due to the political climate.
The central bank blamed the rial's recent drop on increased demand for foreign currencies to import goods for the Muslim fasting month of Ramadan.
Central bank Governor Mohammad Awad bin Hammam told Saba news agency net that speculators may be manipulating exchange rates, which Sfakianakis agreed was likely.
"The local market sees an opportunity to buy dollars because of this uncertainty in Yemen," he said, adding people may also be fleeing from the rial due to anxiety spurred by continued injections and their subsequent failure. "The central bank could fall into a vicious cycle of more injections and increase of interest rates while the rial continues tumbling."
The central bank injected a total of $977 million into the market to support the rial this year, Saba reported. Hammam said in May Yemen had $6.1 billion in reserves then compared to $7 billion a year earlier.
Yemen needs international support, Sfakianakis said, either by helping the state subdue political and security challenges or by offering economic aid, Sfakianakis said. "The international community have said they'll inject money but promises are not good enough for the state Yemen is in now."
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|Publication:||The Daily Star (Beirut, Lebanon)|
|Date:||Jul 31, 2010|
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