The topic of the dollar against the Saudi riyal is one of the most important subjects in the Saudi economic landscape, as investors and individuals seek a deep understanding of how the exchange rate of the US dollar against the Saudi riyal is determined and the role of this pair in the financial stability of the Kingdom. In the Saudi financial market, the dollar against the Saudi riyal has been known for its almost fixed exchange rate since the mid-1980s, with the Saudi Arabian Monetary Authority (SAMA) maintaining a peg of 1 dollar = 3.75 Saudi riyals. This peg has made the currency market in the Kingdom one of the most stable in the region, forming a foundation of trust in local and international trade and investment transactions. In the following article, we will detail the historical and economic context of this peg, the mechanisms that support it, its effects on various economic sectors, and how it interacts with changes in global monetary policies. We will also discuss the latest developments and the most frequently asked questions about the dollar against the Saudi riyal, emphasizing the necessity of consulting financial specialists before making any investment decisions.
Definition of Dollar vs. Saudi Riyal in the Saudi Financial Market
The term dollar against the Saudi riyal (USD/SAR) refers to the exchange rate of the US dollar relative to the Saudi riyal, reflecting the relationship between two major currencies in the global and regional economy. Since the mid-1980s, the Kingdom has adopted a fixed peg system between the riyal and the dollar, setting the dollar price at 3.75 Saudi riyals with a very minimal margin of change. This system is fully managed by the Saudi Arabian Monetary Authority (SAMA), which monitors foreign reserves and controls liquidity to ensure exchange rate stability. In the Saudi Stock Exchange (Tadawul), the dollar is not traded directly as a currency market (Forex), but the dollar's movements reflect in the performance of listed companies, especially sectors reliant on exports or imports in dollars. Therefore, understanding the relationship between the dollar and the riyal means understanding the dynamics of monetary stability in the Kingdom and its impact on various aspects of the local and global economy.
Fixed Peg Policy Between the Riyal and the Dollar: Context and History
The policy of pegging the Saudi riyal to the US dollar officially began in the mid-1980s, following a period of fluctuations in oil prices and global currencies. The Kingdom chose this peg to achieve several goals: to provide stability for local prices, facilitate international trade exchanges, and attract foreign investments. By pegging the riyal to the dollar, the Kingdom avoided sharp currency fluctuations that affect economies with floating currencies. The Saudi Arabian Monetary Authority (SAMA) plays a pivotal role in implementing this policy by managing foreign cash reserves and setting local interest rates in line with US monetary policy. The official peg price has not changed for decades, despite major economic events such as global financial crises or fluctuations in oil prices. This stability reflects Saudi Arabia's commitment to controlling exchange rate risks and achieving long-term economic stability.
How the Peg Works: How SAMA Maintains Stability of the Dollar Against the Saudi Riyal
The Saudi Arabian Monetary Authority (SAMA) manages the fixed peg system through a range of monetary tools and policies. First, SAMA maintains a large foreign cash reserve (exceeding $400 billion in recent years), which gives it the ability to intervene immediately in the market and absorb any pressures on the riyal. Second, SAMA follows changes in interest rates set by the US Federal Reserve and adjusts local deposit and lending rates to maintain the riyal's attractiveness and prevent capital outflows. Third, SAMA monitors liquidity in the banking market and provides foreign currency loans to banks when needed, preventing the emergence of a black market or price gaps. Through these measures, SAMA ensures that the exchange rate of the dollar against the Saudi riyal remains stable around 3.75, with a very narrow margin of fluctuations that does not affect businesses or individuals.
Impact of Exchange Rate Stability on Key Economic Sectors
The stability of the exchange rate of the dollar against the Saudi riyal leads to several tangible economic benefits. In the banking and finance sector, it reduces currency risks in lending and import operations, as customer obligations in dollars or riyals remain without sudden changes. In the oil and petrochemical sector, the fixed peg gives Saudi companies the ability to plan long-term finances, as most of their revenues come in dollars. Additionally, stability in the exchange rate allows trading companies and importers to set more accurate pricing plans without the need for continuous hedging against currency fluctuations. The aviation and tourism sector benefits from stable international service costs, as fuel prices and services linked to dollars remain within known limits. Overall, exchange rate stability enhances confidence in the Saudi economy and makes the Kingdom a preferred destination for foreign direct investment.
Impact of US Monetary Policies on the Saudi Riyal
Due to the fixed peg between the riyal and the dollar, Saudi monetary policy is directly affected by decisions made by the US Federal Reserve. When the US Fed raises or lowers interest rates, SAMA typically follows suit to maintain capital flow balance and protect the peg. For example, in 2024, the US Fed reduced the interest rate by 25 basis points, prompting SAMA to take similar action. This alignment reflects on investor sentiment in the Saudi market, where stock markets rise when interest rate cuts are anticipated and inflation eases. However, SAMA retains some flexibility in adjusting its regulatory tools according to local conditions, but the general trend remains consistent with US monetary policy to ensure the sustainability of the peg and economic stability.
Latest Data on the Dollar to Saudi Riyal Exchange Rate (2024-2025)
During 2024 and 2025, the exchange rate of the dollar against the Saudi riyal remained stable at approximately 3.75, with a very narrow trading margin ranging between 3.7500 and 3.7509 riyals per dollar in the banking market. The markets did not witness any significant changes in the peg price, despite fluctuations in oil prices and international monetary policies. The Kingdom maintained a strong foreign cash reserve exceeding $400 billion, enabling it to absorb any potential pressures on the currency. The recent period also saw robust growth in non-oil GDP exceeding 5%, and inflation rates stabilized below 3%, reflecting the success of the peg policy in supporting economic stability. These indicators confirm the Saudi authorities' commitment to continuing the peg policy and no intention to change it in the near term.
Role of Tadawul and Financial Markets in Reflecting Dollar Movements Against the Riyal
Although the Tadawul platform focuses on stocks and financial instruments rather than currencies, the movements of the dollar against the Saudi riyal indirectly reflect in the financial market. The profits of listed companies, especially oil and petrochemical companies, are affected by changes in the dollar price in the global market, as their revenues are denominated in dollars. Additionally, expectations regarding US interest rates affect investor sentiment in the market, as any change in interest rates impacts financing costs and capital flows. Therefore, investors closely monitor dollar movements and US monetary policies, even if there is no official market for trading the dollar/riyal pair on the Tadawul platform.
Importance of Foreign Cash Reserves in Supporting the Peg Policy
The foreign cash reserves held by SAMA are the backbone of the Kingdom's ability to maintain the peg of the riyal to the dollar. This reserve, which usually exceeds $400 billion, provides SAMA with the ability to intervene in the currency market when needed, either by buying or selling dollars to adjust supply and demand, or by supporting liquidity for local banks. The reserve also covers the Kingdom's import needs and finances the fiscal deficit, enhancing the confidence of local and international investors in the sustainability of the exchange rate. Thanks to this large reserve, the Kingdom has been able to withstand numerous global financial crises without affecting the fixed exchange rate, reflecting the strength of Saudi monetary policy.
Competing and Alternative Currencies in the Saudi Market
Despite the dominance of the US dollar in the Saudi market, there are competing and alternative currencies used for import and international trade purposes, such as the euro, UAE dirham, and Omani rial. However, these currencies are not directly pegged to the Saudi riyal but are traded as needed in the banking market. On the other hand, some Gulf currencies are pegged to the US dollar (such as the UAE dirham and Omani rial), making their monetary policies closely aligned with Saudi Arabia. Additionally, some investors view gold and cryptocurrencies as asset diversification, but their proportion in local liquidity remains limited compared to the dollar. Ultimately, the peg policy to the dollar remains the most prominent, giving the Saudi riyal a unique position in the region.
Impact of Dollar Stability Against the Saudi Riyal on Trade and Imports
The stability of the exchange rate of the dollar against the Saudi riyal provides importing and exporting companies with a competitive advantage in cost and pricing planning. Importers can set future prices more accurately without the need for continuous hedging against currency fluctuations. Exporting companies, especially those in the oil sector, benefit from converting dollar revenues to riyals at a fixed exchange rate, facilitating liquidity management and financing local operations. This stability enables both small and large companies to establish long-term financial plans without fears of sudden changes in currency value, enhancing confidence in the local economy and encouraging increased foreign trade volume.
The Relationship Between Oil and the Dollar in the Saudi Economy
Oil plays a pivotal role in supporting the peg policy between the riyal and the dollar, as most of the Kingdom's oil exports are denominated in US dollars. Rising oil prices lead to a significant influx of dollars into the Saudi economy, strengthening SAMA's cash reserves and supporting exchange rate stability. Conversely, any significant drop in oil prices may exert pressure on reserves, but so far, the Kingdom has managed to maintain peg stability thanks to its massive reserves and prudent financial measures. The relationship between oil and the dollar remains a key factor in shaping Saudi monetary policy and determining the Kingdom's ability to continue its fixed peg policy.
Recent Developments in Currency Exchange and Money Transfer Services
In recent years, there has been a notable development in currency exchange and money transfer services in the Kingdom, as Saudi banks have launched digital platforms that allow customers to easily purchase and transfer dollars through banking applications. Currency exchange companies have also developed new technological solutions that facilitate the buying and selling of dollars at prices close to the official rate. Nevertheless, most daily transactions are denominated in Saudi riyals, and payment in dollars is not allowed in local stores except in international sectors such as aviation and major hotels. These developments enhance the ease of dealing with foreign currencies and support the stability of the local financial market.
The Role of Tourism and Pilgrimage in Dollar Movements Against the Saudi Riyal
Religious tourism (Hajj and Umrah) is one of the largest sources of foreign cash inflow into the Kingdom, bringing millions of visitors from abroad with foreign currencies, primarily the US dollar. These currencies are converted into Saudi riyals through local banks and currency exchange companies to pay for accommodation and services. This seasonal influx of dollars enhances liquidity in local banks and contributes to exchange rate stability, without significantly affecting the official peg price. In fact, this excess liquidity supports SAMA's ability to manage cash reserves and provides an additional boost to the local economy during Hajj and Umrah seasons.
Inflation Indicators and Stability of the Purchasing Power of the Saudi Riyal
The peg of the riyal to the US dollar contributes to reducing fluctuations in local prices and controlling inflation levels. During 2024, the Kingdom recorded moderate inflation rates (below 3%), partly due to exchange rate stability and government support policies for essential goods. This stability allows consumers to maintain their purchasing power and mitigates the impact of global price changes on goods. It also creates a stable economic environment that fosters growth and investment, reducing inflationary pressures experienced by other countries with floating or volatile currencies.
Conclusion
The stability of the dollar against the Saudi riyal has become one of the pillars of the Kingdom's economic policy, supporting confidence in the financial market and enabling stable planning for individuals and companies. Through the fixed peg and management of substantial reserves, the Saudi Arabian Monetary Authority (SAMA) has maintained a fixed exchange rate that promotes growth and limits inflation, despite ongoing changes in the global economy. However, it is important to note that any financial or investment decision should be made based on careful study and with the assistance of licensed financial specialists. The SIGMIX platform provides you with advanced tools to monitor the market and analyze economic indicators, but consulting a certified financial advisor remains a necessary step to make sound financial decisions that align with your goals and personal circumstances.
Frequently Asked Questions
The exchange rate of the dollar against the Saudi riyal is fixed at approximately 1 US dollar = 3.75 Saudi riyals, according to the official policy adopted by the Saudi Arabian Monetary Authority (SAMA). Prices may vary slightly between banks or exchange offices, but the difference does not exceed a few parts per thousand. This stability provides investors and consumers with high confidence in financial and commercial planning without surprises from currency fluctuations.
The decision to peg the riyal to the dollar was made to ensure economic stability, as the Saudi economy heavily relies on dollar-denominated oil revenues. The peg reduces the risks of currency fluctuations, maintains stable prices for imported goods, and provides greater confidence to local and foreign investors. It also facilitates international trade operations and limits financing costs, making the Saudi economy less vulnerable to shocks from global markets associated with floating currencies.
So far, there are no official signals or government statements indicating an intention to modify the riyal's peg to the dollar in the near future. All data and reports issued by SAMA and official entities confirm the continuation of the peg policy at 3.75 riyals per dollar. If any change occurs, it would have a significant impact on the economy, so it is expected that the policy will remain stable unless there are radical economic changes.
Since the Saudi riyal is pegged to the dollar, local interest rates are directly affected by decisions made by the US Federal Reserve. When the Fed raises interest rates, SAMA typically follows suit, and vice versa when rates are lowered. This alignment aims to maintain the attractiveness of the riyal compared to the dollar and prevent capital outflows from the Kingdom. Changes in interest rates also affect financing and investment costs in the Saudi market.
The stability of the dollar against the Saudi riyal reduces currency risks, enhances investor confidence, and helps control inflation rates. It also enables companies to plan long-term finances without the need for continuous hedging against currency fluctuations. Additionally, stability facilitates international trade operations and provides the Saudi economy with a favorable environment for growth and attracting foreign investments.
Dollars can be bought or sold in Saudi Arabia through authorized commercial banks or licensed exchange offices. Most banks offer currency exchange services through branches or banking applications, and the price is often very close to the officially announced rate. There are no significant restrictions on transfers for personal or commercial purposes, but clarification of the reason for the transfer may be required for large amounts for regulatory purposes.
Yes, most Saudi banks provide credit and debit cards bearing Visa or Mastercard logos, which can be used internationally in Saudi riyals, with the amount converted to dollars at the approved exchange rate upon settlement. Some local digital wallets have also begun offering foreign currency transfer services, but daily use of dollars within the Kingdom remains limited to commercial transactions and international travel.
The fixed peg between the riyal and the dollar makes the Saudi market more attractive to foreign investors, providing them with stability in the value of their investments and reducing currency fluctuation risks. It also facilitates international visitors (pilgrims and Umrah performers) in converting their currencies to riyals at a fixed exchange rate, enhancing their confidence in financial transactions within the Kingdom. All of this contributes to increasing investment and tourism flows to Saudi Arabia.
Fluctuations in oil prices affect the volume of foreign cash reserves held by SAMA, as dollar revenues increase with rising oil prices. However, recent changes in oil prices have not led to a change in the exchange rate of the dollar against the riyal, thanks to the large reserves and effective liquidity management. The peg policy continues to support stability even during periods of global oil price fluctuations.
There are no contracts or products for trading the dollar against the Saudi riyal directly on the Tadawul platform, which focuses on stocks and other financial instruments. However, dollars can be bought and sold through banks and exchange offices. The impact of the dollar is reflected in stock trading through its effect on company results, especially those reliant on exports or imports in dollars.
The Saudi Arabian Monetary Authority (SAMA) plays a fundamental role in maintaining the peg of the riyal to the dollar by managing foreign cash reserves, monitoring liquidity in the banking system, and adjusting local interest rates in line with US monetary policy. SAMA also intervenes in the currency market when necessary to ensure that the official price remains stable around 3.75 riyals to the dollar.
The peg to the dollar contributes to stabilizing local prices and controlling inflation rates, as it prevents currency fluctuations from directly impacting the prices of imported goods and services. Government policies also enable intervention when necessary to control the prices of essential goods. In recent years, exchange rate stability has helped maintain a relatively low inflation rate compared to several countries with floating currencies.