Dollar to Riyal: Comprehensive Overview of Exchange Rate Impact

The term "Dollar to Riyal" is used to refer to the exchange rate of the US dollar against the Saudi riyal. Simply put, it is the number of riyals that can be obtained for one US dollar. In Saudi Arabia, this rate is a key component of monetary policy and macroeconomics, given that government revenues primarily depend on oil priced in dollars. Since 1986, the Saudi riyal has been pegged to the dollar at a fixed rate of approximately 3.7500 riyals per dollar. This stability provides the Saudi market with financial stability and reduces the risks of exchange rate fluctuations, positively reflecting on local financial markets, especially Tadawul. It also facilitates foreign investors' decision-making in the Saudi market without the need to hedge against currency risks. Under this system, the Saudi Central Bank (SAMA) manages foreign reserves to ensure the availability of dollars in the local market and maintain exchange rate stability.

According to the latest official data up to mid-2025, the exchange rate of the dollar against the Saudi riyal remains nearly stable at 3.7500 riyals per dollar. During 2024 and 2025, the actual market price fluctuated within a very narrow range (3.7450–3.7540), reflecting a rare historical stability, with daily fluctuations not exceeding ±0.1%. This stability is attributed to the strict policy followed by the Saudi Arabian Monetary Authority (SAMA) in managing foreign reserves, which reached approximately 543 billion USD by the end of 2024 and remained in the range of 500–560 billion USD throughout 2025. Additionally, improved oil revenues contributed to supporting this stability. During periods of rising US interest rates, the Saudi market kept pace with these increases to ensure the stability of the riyal, with moderate inflation rates between 1.5% and 4%. All these factors have maintained the confidence of local and international investors in the Saudi riyal.

Most stocks listed on Tadawul are traded in Saudi riyals; however, many companies rely on revenues or purchases in US dollars. The stability of the Dollar to Riyal exchange rate reduces the volatility of results for companies that export products priced in dollars (such as petrochemical and energy companies) and limits cost risks for importing companies. If the dollar rises against the riyal, costs for importing companies increase, which may affect profit margins. In cases of a strong riyal, exporting companies may benefit as their products become cheaper in global markets. From a foreign investment perspective, exchange rate stability provides a safer investment environment, as foreign capital does not worry about potential losses due to currency fluctuations when converting profits. Overall, the stability of the Dollar to Riyal exchange rate is a significant factor in the attractiveness of the Saudi stock market.

The Saudi Arabian Monetary Authority (SAMA) has followed a policy of pegging the riyal to the dollar for over three decades. This policy involves continuous intervention to balance supply and demand for dollars in the local market by managing substantial foreign reserves and adopting interest rate policies closely aligned with the US Federal Reserve. When pressures arise on the riyal, SAMA intervenes by injecting or withdrawing liquidity from the market or using government debt instruments. SAMA also monitors global market conditions, especially oil prices and movements of other foreign currencies, to ensure continued exchange rate stability. This policy has proven effective in protecting the Saudi economy from global market fluctuations, particularly during financial crises or declines in oil prices.

The inflation rate in Saudi Arabia is partially linked to the Dollar to Riyal exchange rate; however, the peg of the riyal to the dollar has helped limit the transmission of imported inflation to the local market. In the event of a global dollar increase, the prices of imported goods remain relatively stable as long as the riyal's value remains fixed. However, any significant rise in the prices of goods or services in the United States may indirectly transfer to the Kingdom through trade channels. In recent years (2024–2025), the Saudi inflation rate has remained moderate (1.5%–4%), partly due to cautious monetary policy, as well as internal factors such as improving the efficiency of government support and controlling taxes and customs duties.

Foreign reserves play a pivotal role in supporting the stability of the Saudi riyal against the dollar. By the end of 2024, these reserves amounted to approximately 543 billion USD, making it one of the largest reserves globally. These reserves enable SAMA to intervene effectively in the market whenever necessary, whether by buying or selling dollars or supporting local banks. Additionally, high oil revenues contribute to increasing these reserves, enhancing the Kingdom's ability to withstand any potential pressures on the local currency. Under these policies, the Saudi riyal has maintained its stability even amid global market fluctuations and oil price changes.

Saudi oil, the primary source of Saudi revenues, is priced in US dollars in global markets. When converting these revenues to riyals at a fixed exchange rate, the government and companies can predict revenues and convert profits without worrying about currency fluctuations. Additionally, the stability of the Dollar to Riyal exchange rate makes the Saudi trade balance less susceptible to risks arising from currency fluctuations. In the period 2024–2025, oil revenues and industrial exports continued to support the trade surplus, positively reflecting on foreign reserves and macroeconomic stability.

In the context of the Saudi market, the US dollar is the primary foreign currency for trade and reserves. However, there are other currencies considered competitive or alternative in global markets, such as the Euro, Japanese Yen, Chinese Yuan, and UAE Dirham. Some Gulf countries, such as the UAE and Oman, follow similar pegging policies for their currencies to the dollar, which enhances regional stability and reduces speculation risks among Gulf currencies. Nevertheless, the dollar remains the primary reference currency in the Kingdom, whether in trade, investments, or government reserves.

Decisions by the US Federal Reserve directly affect interest rates in Saudi Arabia due to the fixed peg policy between the riyal and the dollar. When the Fed raises interest rates, SAMA follows suit to maintain the riyal's attractiveness compared to the dollar and prevent capital outflows. In 2024–2025, US interest rates experienced gradual increases, which reflected on local interest rates. These measures ensure the stability of the riyal and protect it from speculation while supporting price stability in the domestic market and preventing imported inflation.

The Saudi market includes a large number of local banks and licensed exchange companies that provide currency conversion services for individuals and businesses. These entities play an important role in providing dollars to the local market at prices very close to the official rate. During the Hajj and Umrah seasons, demand for dollars and foreign currencies increases; however, exchange rate fluctuations remain limited thanks to SAMA's management and the abundance of reserves. Major banks such as Al-Rajhi, Al-Ahli, and Riyadh offer competitive exchange rates and allow customers to easily purchase dollars, contributing to market flexibility and stability.

Through Vision 2030, the Kingdom aims to diversify its economy and reduce dependence on oil as a primary source of income. With increased foreign direct investment and the development of new sectors such as tourism and industry, the importance of the stability of the Dollar to Riyal exchange rate grows to attract foreign capital. Exchange rate stability gives investors confidence in converting their profits without additional risks and facilitates long-term financial planning for Saudi companies. The continuation of the peg policy is considered one of the fundamental pillars to achieve the goals of Vision 2030 and make the Saudi market more attractive to global investors.

Despite the success of the fixed peg policy so far, there are future challenges that the Kingdom may face, such as fluctuations in oil prices, changes in the global economy, or inflation pressures. In the event of significant changes in global markets or US policies, the Kingdom may have to review its monetary policy. However, the Kingdom's substantial reserves and its long experience in managing the exchange rate provide it with significant flexibility in facing these challenges. It is important to monitor global market developments and economic reports to understand the future of the peg policy and the stability of the riyal.

During 2024 and 2025, Saudi authorities confirmed the continuation of the fixed peg policy between the riyal and the dollar, with no intention to change it at present. The US dollar experienced global fluctuations due to decisions by the US Federal Reserve and international political events; however, the impact on the Saudi riyal was extremely limited. Locally, the Kingdom continued to issue sovereign debt instruments in dollars and euros to attract foreign investments, and foreign reserves increased supported by the recovery in oil prices. In the local exchange market, daily fluctuations remained within a very narrow range, reflecting the success of monetary policy in maintaining the stability of the national currency.