Business: Economy & Business, Nov. 27, 1978

One burden of world financial power that Saudi Arabia so far has escaped is worry about the day-to-day fluctuations of its own currency. The Saudi riyal (rhymes with gee doll) is rarely even seen by foreign money traders, and its value essentially is fixed by the Saudis themselves—quite puzzlingly. Though the riyal has

been revalued upward 14 times since October 1977, the total increase against the dollar has been only 7%, from 280 to 300.

The Saudis have gained little from that, except perhaps a heightening of the aura of prestige surrounding them in international money markets. The value of the riyal in dollars does not affect its purchasing power at home, and the Saudis pay for imports and foreign investments not with riyals but with the dollars they get from oil sales. Indeed, the Saudis let few riyals out of the country; they do not want the riyal to become an international currency, lest its value be set by speculators and other money traders. Authorities have kept the formula by which they peg the riyal's value a deep secret. A London bank once set its computers to work trying to calculate the formula, to see whether and how it was related to the Saudis' trading surplus or the fluctuations of the dollar against other currencies, but drew a complete blank.

Speculators have trouble getting hold of riyals. Some branches of European and American banks in Bahrain have attempted to float bond issues denominated in riyals in Europe. They got a stern bawling out from the Saudis for not asking permission to launch what the Saudis feared might be the beginning of a perilously unstable Euroriyal market.