Dollar Riyal: The Relationship Between Saudi Riyal and US Dollar

The term Dollar Riyal symbolizes the relationship between the Saudi Riyal and the US Dollar, which forms the cornerstone of the monetary system in the Kingdom. Since 1986, the Saudi Central Bank (SAMA) has adopted a fixed peg policy, where one US Dollar is equivalent to approximately 3.75 Saudi Riyals. This fixed peg means that the value of the Riyal does not change against the Dollar, providing the Saudi economy with monetary stability and protecting it from fluctuations in global currency markets. In the Saudi financial market, the Riyal is not traded as an independent asset; rather, all financial assets, stocks, and investment portfolios are priced in Riyals. The importance of Dollar Riyal is evident in all currency conversions, asset valuations, and investment planning, as the fixed peg allows both local and international investors clarity in transactions and accurate financial planning that limits the risks of exchange rate fluctuations.

The Kingdom of Saudi Arabia officially adopted the policy of pegging the Riyal to the US Dollar in 1986, a strategic move aimed at achieving economic stability. The primary reason for this peg is that most of the state's revenues come from oil exports, which are priced globally in Dollars. This peg protects the local economy from global exchange rate fluctuations and reduces the risks of unwanted inflation resulting from currency volatility. Additionally, the peg facilitates financial planning for both the government and companies alike, providing investors with greater confidence in the local currency. This system enhances the ability to attract foreign investments, as it alleviates investors' concerns regarding currency value fluctuations. Through the peg policy, the Kingdom has been able to maintain long-term financial stability, positively reflecting on all sectors of the economy, particularly the financial and banking sectors.

As of the end of 2025, the exchange rate of the Saudi Riyal against the US Dollar has remained stable at 3.7500 Riyals per one Dollar. This official rate is announced by the Saudi Central Bank and is considered one of the highest rates of monetary stability in the region and the world. There are no significant fluctuations in this rate due to the strict monetary policy and the substantial foreign reserves managed by the Kingdom. For consumers and investors, the fixed exchange rate ensures stable purchasing power of the Riyal in international transactions and simplifies the calculation of costs and returns on foreign and local investments. Additionally, this stability prevents sudden financial shocks and mitigates price volatility in the local market. It is noted that the differences between the official exchange rate and the rates at banks or exchange shops often relate only to service fees without any actual change in the base rate.

The Saudi Central Bank (SAMA) plays a pivotal role in maintaining the stability of the exchange rate of the Riyal against the Dollar. The bank manages substantial foreign currency reserves estimated between 450 and 500 billion US Dollars as of 2024. These reserves enable the central bank to intervene in case of any pressures on the currency, whether through the money market or direct interventions. The bank also follows interest rate policies aligned with the US Federal Reserve's trends to minimize the gap between local and Dollar interest rates and prevent capital outflows. Maintaining this peg requires continuous monitoring of inflation rates, capital flows, and changes in the global economy, in addition to efficiently managing local liquidity. Thus, the Saudi Central Bank serves as a safeguard to ensure the continuity of the peg and the stability of the national currency.

The stability of the relationship between the Saudi Riyal and the US Dollar directly affects the financial and investment sectors in the Kingdom. For banks, the peg facilitates international transfers and cash settlements, reducing exchange rate risks in lending and deposits in foreign currencies. Major companies, especially those reliant on exports or imports, benefit from price clarity and cost forecasts, as profits or expenses in Riyals remain relatively stable despite global Dollar fluctuations. The Saudi stock market (Tadawul) also benefits from this stability in attracting foreign investors, as they can convert their capital between Riyals and Dollars without significant risks. Furthermore, the peg enhances investor confidence in the local market and is a key factor in long-term economic planning for both public and private sector companies.

The foreign reserves of the Saudi Central Bank are among the most significant pillars of the stability of the Riyal against the Dollar. In 2024, these reserves reached between 450 and 500 billion US Dollars, a substantial figure sufficient to cover imports for several years and support the currency in times of crises. The existence of such reserves allows the central bank to intervene in the currency market if necessary and enables it to defend the fixed peg rate. This high level of reserves reflects global confidence in the Saudi economy and its ability to meet its financial commitments. For investors, these reserves provide additional security, ensuring that the Kingdom can maintain the peg even during times of economic challenges or external pressures.

The inflation rate in Saudi Arabia is closely linked to global monetary policies, especially those followed by the US Federal Reserve. In 2024 and 2025, the Saudi inflation rate recorded moderate levels ranging between 2.0% and 3.0%. Local inflation is affected by changes in global commodity prices; however, the stability of the exchange rate limits the transmission of imported inflation to the local economy. On the other hand, interest rates in the Kingdom often follow the movements of US interest rates, with the repo rate reaching approximately 5.0% in mid-2025. This alignment in interest rates is essential to maintain the attractiveness of the Riyal and prevent capital outflows, forming a crucial part of the central bank's strategy to sustain monetary stability.

The Saudi Riyal maintains its strength in foreign trade due to the fixed peg with the US Dollar. In 2024, the Kingdom's exports reached approximately 800 billion Dollars, mostly from oil and petrochemicals, while imports were estimated at around 300 billion Dollars. The significant trade surplus enhances the strength of the Riyal and provides Dollar liquidity to the central bank. Additionally, fixing the exchange rate ensures stability in import and export costs, reducing the risks of international price fluctuations on the local economy. For Saudi companies dealing with foreign suppliers or customers, the fixed peg facilitates financial planning and accurate pricing of contracts, supporting the competitiveness of Saudi exports in global markets.

The Saudi stock market (Tadawul) significantly benefits from the stability of the relationship between the Riyal and the Dollar. All listed stocks are priced and traded in Riyals, ensuring clarity in asset valuation for both local and foreign investors. By the end of 2025, the market capitalization of listed stocks reached approximately 13.5 trillion Saudi Riyals (~3.6 trillion Dollars). The stability of the exchange rate contributes to reducing risks for international investors, as they can convert their investments between Riyals and Dollars without concerns about currency fluctuations. This stability also facilitates the listing of foreign companies and expands the investor base, enhancing market liquidity and depth. Thanks to the monetary peg, stock price movements are based on company fundamentals and financial performance rather than currency fluctuations.

The banking sector in Saudi Arabia is one of the most benefited from the fixed peg between the Riyal and the Dollar. Major banks such as Al Ahli, Al Rajhi, Riyadh, and Saudi British Bank offer currency exchange and transfer services in both Riyals and Dollars, benefiting from stability in liquidity management and providing loans and deposits. Additionally, major companies, especially Aramco, SABIC, and refining companies, rely on the Dollar for pricing their exports, while their domestic operations are priced in Riyals. The stability of the exchange rate reduces profit volatility risks and supports long-term financial planning. Even non-oil sectors, such as petrochemical and food industries, benefit from stable import and export prices, enhancing their competitiveness both locally and globally.

Officially, there is no open Forex market for the public in Saudi Arabia, but licensed banks and exchange offices offer services to buy and sell Dollars and foreign currencies at prices very close to the official rate. For large institutions and importers, forward contracts can be made with banks to lock in future exchange rates. Thanks to the fixed peg, exchange rate differentials are extremely limited, and there is little room for profit from speculating on the Riyal against the Dollar. This reality reduces risks for investors and individuals, making the Saudi financial market more stable compared to volatile currency markets in other countries.

In the Gulf region, many currencies such as the UAE Dirham, Bahraini Dinar, and Omani Rial rely on similar pegging systems to the US Dollar. These currencies are indirect competitors to the Riyal in attracting foreign investments, as they all provide a stable monetary environment. Globally, major currencies such as the Euro and Chinese Yuan remain competitors in the distribution of international investments; however, the peg to the Dollar gives the Saudi Riyal a clear advantage in oil-related markets and international trade. Ultimately, the stability of the Dollar itself is the main factor determining the strength of the Riyal, as any significant changes in the global status of the Dollar may reflect on all currencies linked to it.

During 2024 and 2025, Saudi official entities repeatedly affirmed their commitment to the policy of pegging the Riyal to the Dollar, considering it a long-term strategic option. No significant changes have occurred in the peg system or in the main monetary policies. Economic reports have shown that the performance of companies listed in the Saudi stock market has reached record levels, driven by rising oil prices and growth in non-oil sectors. At the same time, the Saudi Central Bank has kept pace with US interest rate movements while maintaining liquidity and foreign reserves stability. The Kingdom is also moving towards enhancing digitization in financial payments, contributing to the development of the financial sector without compromising the fixed peg policy. All these factors enhance the attractiveness of the Saudi market for both local and international investors.

Saudi Vision 2030 aims to diversify national income sources and reduce dependence on oil; however, the fixed peg between the Riyal and the Dollar remains one of the main pillars of economic policy. The continuation of this peg supports the financial stability necessary to attract foreign investments and achieve the vision's goals, especially in infrastructure projects and smart cities like NEOM. At the same time, the government is working to develop non-oil sectors and increase the economy's flexibility in the face of global changes while maintaining the strength of the national currency. It is expected that the peg will continue as long as it serves development and stability goals, with periodic reviews of monetary policies in light of regional and global economic changes.