The dollar to riyal exchange rate is one of the key economic indicators of interest to investors in the Saudi financial market, especially given the Saudi riyal's peg to the US dollar for decades. The stability of this rate—hovering around 3.75 riyals per US dollar—directly reflects the financial and economic stability in the Kingdom, providing a secure investment environment for both local and foreign investors. In this comprehensive article, we detail the background of the fixed peg policy, its economic dimensions, and how the Saudi Central Bank (SAMA) manages the monetary relationship to ensure stability. We also discuss the impact of the dollar to riyal exchange rate on various economic sectors and provide an in-depth analysis of recent developments (2024-2025), based on official data and reliable sources. This material aims to provide the reader with a comprehensive understanding of the dynamics of the exchange rate in Saudi Arabia, the influencing factors, and how the financial market operates under this stability, without offering any investment recommendations, in compliance with the regulations of the Capital Market Authority.
What is the Dollar to Riyal Exchange Rate and Why is it Important for the Saudi Market?
The dollar to riyal exchange rate is simply the value at which the US dollar can be converted to the Saudi riyal and vice versa, officially set by the Saudi Arabian Monetary Authority (SAMA) at 3.75 riyals per dollar. This rate has not changed significantly since the mid-1980s, making it one of the most stable exchange rates in the world. The importance of this peg lies in ensuring financial stability, as Saudi Arabia heavily relies on the dollar for its trade transactions, particularly in the oil and imported goods sectors. Additionally, most foreign capital flows into the Saudi financial market (Tadawul) occur through the dollar. This stability reassures both foreign and local investors regarding currency fluctuation risks, making it a key attraction for investment in the Kingdom. At the same time, the stability of the dollar to riyal exchange rate reflects the government's commitment to protecting the national economy from global shocks and fluctuations in international currency markets.
The Fixed Peg Policy Between the Riyal and the Dollar: Historical Background and Reasons for Continuation
Saudi Arabia has adopted a policy of pegging the riyal to the US dollar at a nearly fixed rate since the mid-1980s, driven by its desire to achieve monetary stability and protect the national economy from fluctuations in foreign currency prices. This peg allows the Kingdom to benefit from the dollar's status as a global reserve currency and reduces the risks of shocks from imported goods prices. Statements from the Monetary Authority and the Capital Market Authority have reiterated their commitment to this peg as long as national interests are achieved, based on the Kingdom's massive foreign reserves, which exceeded $700 billion in 2024-2025. Additionally, the stability of the exchange rate contributes to controlling inflation rates and provides a conducive environment for long-term corporate and investor planning. The fixed peg stands out as one of the pillars of Saudi financial policy, especially given the economy's significant reliance on dollar-denominated oil revenues.
Mechanism of Exchange Rate Stabilization and the Role of the Saudi Arabian Monetary Authority (SAMA)
The Saudi Central Bank (SAMA) plays a pivotal role in stabilizing the riyal's exchange rate against the dollar by managing its massive foreign reserves and adjusting monetary policies according to international variables. SAMA sets the official exchange rate daily and injects or withdraws liquidity from the banking system as needed to maintain this rate. It also closely follows US monetary policies related to interest rates, often raising or lowering repo rates in line with decisions made by the US Federal Reserve. This mechanism ensures that the riyal remains attractive to both local and foreign investors and prevents currency speculation. The availability of substantial foreign reserves (exceeding $700 billion by the end of 2024) serves as an important safety valve that protects the exchange rate from potential pressures in global markets.
Saudi Foreign Reserves: The Cornerstone of Currency Stability
The foreign reserves held by SAMA are the mainstay supporting the fixed peg between the riyal and the dollar. By the end of 2024, these reserves reached approximately $700 billion, a record figure reflecting the strength of Saudi financial standing. Most of these reserves come from dollar-denominated oil export revenues and are used as a precautionary tool to intervene in the currency market if necessary. This cash abundance allows the central bank to intervene immediately to buy or sell dollars to stabilize the official exchange rate and maintain confidence in the national economy. Additionally, high reserves enhance the Kingdom's credit rating globally and support the government's ability to finance development projects without putting pressure on the local currency.
Impact of the Peg Policy on Inflation and Local Prices
The fixed peg between the riyal and the dollar has contributed to stabilizing inflation rates in the Kingdom, which ranged between 2% and 3% in 2024. This is due to the fact that most imported goods are priced in dollars, reducing the impact of currency fluctuations on local prices. However, US inflation partially transfers to the Saudi economy, especially if global dollar-denominated commodity prices rise. In such cases, SAMA adjusts local interest rates to balance inflationary impacts. Conversely, the stability of the exchange rate limits the risks of sudden price increases and provides greater financial planning space for households and businesses.
The Dollar to Riyal Exchange Rate and Its Effect on Various Economic Sectors in Saudi Arabia
The stability of the dollar to riyal exchange rate directly and indirectly affects various economic sectors in Saudi Arabia. In the banking sector, the peg contributes to stabilizing financing operations and reduces currency risks in lending and importing activities. The oil and petrochemical sector benefits from pricing exports in dollars, meaning that revenues are not affected by fluctuations in the local currency. In the real estate and construction sector, exchange rate stability helps stabilize the costs of imported materials, while other sectors such as tourism and trade face challenges and opportunities linked to the strength of the dollar globally. The most significant impact of the peg is providing the Saudi economy with monetary stability and an attractive investment environment.
Relationship Between the Dollar to Riyal Exchange Rate, Interest Rates, and Monetary Policy
Given the riyal's peg to the dollar, Saudi Arabia generally follows US interest rate policies. When the US Federal Reserve raises interest rates, SAMA takes similar actions to maintain the riyal's attractiveness and prevent capital flight. During 2024, interest rates in Saudi Arabia rose to about 7.25%, in line with US policy, before beginning to show signs of stabilization or slight reduction as inflation stabilized. These changes affect borrowing costs for individuals and businesses and play a significant role in directing liquidity within the Saudi economy. Adjusting interest rates is a key tool for SAMA to maintain the stability of the dollar to riyal exchange rate.
Impact of Exchange Rate Stability on the Saudi Financial Market (Tadawul)
The stability of the dollar to riyal exchange rate provides significant stability to the Saudi stock market (Tadawul), allowing local and foreign investors to plan their investments without worrying about currency fluctuations. All stocks and bonds in the Saudi market are denominated in riyals, meaning that a foreign investor converting funds into riyals does not face significant exchange risks as long as the peg remains intact. This stability enhances the attractiveness of the Saudi market for foreign investments and reduces costs associated with currency conversion or hedging against exchange fluctuations. It also allows listed companies to better predict their future revenues and costs.
Comparison of the Saudi Riyal with Other Competing Gulf Currencies
The Saudi riyal is characterized by its stability compared to many regional currencies, as most Gulf countries (such as the UAE, Qatar, and Bahrain) follow similar peg policies with the dollar. However, each has its own specifics in managing monetary policy and reserves. The exchange rates of the UAE dirham (3.6725 per dollar), Qatari riyal (3.64 per dollar), and Bahraini dinar (0.377 per dollar) are also stable, enhancing the stability of trade exchanges in the region. However, the size of the Saudi economy and the abundance of its reserves make it more capable of facing crises. On the other hand, Gulf currencies remain closely tied to dollar fluctuations, making the entire region susceptible to US Federal Reserve policies.
Impact of Global Dollar Fluctuations on the Saudi Economy Despite the Fixed Peg
Despite the internal stability of the dollar to riyal exchange rate, global fluctuations in the dollar's value have indirect implications for the Saudi economy. For example, a rise in the dollar globally may lead to increased revenues from dollar-denominated oil, while a decline could reduce the purchasing power of oil revenues. Additionally, changes in the dollar's value affect the prices of imported goods, and consequently local inflation rates. Furthermore, investment flows and the prices of Saudi financial assets are influenced by shifts in US monetary policy and global geopolitical factors.
Analysis of Recent Data and Figures on the Dollar to Riyal Exchange Rate (2024-2025)
Official data up to the end of 2025 indicates that the dollar to riyal exchange rate remains stable within a margin of 3.75 riyals per dollar, with minor differences not exceeding fractions of a halala in spot markets. Saudi foreign reserves remained at high levels (around $700 billion), while the annual inflation rate ranged between 2% and 3%. Official interest rates stabilized at 7.25%, with expectations of stabilization or slight reduction by the end of 2024. In contrast, the markets did not experience significant pressures on the official exchange rate, thanks to the strength of Saudi financial standing and high oil revenues. These figures reflect the success of the peg policy in achieving monetary and financial stability in the Kingdom.
Developments in the Saudi Financial Markets and Their Impact on the Exchange Rate
The Saudi financial market witnessed increasing foreign investment flows during 2024-2025, driven by opening the market to global investors and facilitating investment procedures. Reports from international rating agencies (such as Fitch and Moody's) confirmed the robustness of the Saudi economy and the continued fixed peg as a key factor for market stability. Additionally, technological initiatives (such as the launch of digital wallets linked to the riyal) have enhanced confidence in the national currency. At the same time, high oil prices supported foreign reserves and reduced any potential pressures on the exchange rate. All these developments led to further stability in the dollar to riyal exchange rate, making the Saudi market a preferred destination for long-term investments.
Regulatory Framework and the Role of the Capital Market Authority in Protecting Monetary Stability
The Saudi Capital Market Authority (CMA) is committed to establishing regulatory frameworks that support transparency and stability in the financial market and works closely with the Monetary Authority to ensure exchange rate stability. These policies include monitoring capital flows, regulating foreign investor transactions, and providing accurate information on exchange rates and liquidity. The authority also imposes restrictions on certain financial instruments that may increase market volatility or expose the national currency to unforeseen risks. This is part of a framework to protect investors and ensure a stable investment environment characterized by fairness and transparency, without providing any direct investment advice to market participants.
Future of the Peg Policy and Expectations for Continued Fixed Pricing
Despite changes in the global economy, Saudi official entities continuously affirm their commitment to maintaining the fixed peg between the riyal and the dollar. The peg policy remains a strategic option supported by massive foreign reserves and plays a crucial role in protecting the national economy from external fluctuations. With the continued strength of the financial sector and high oil revenues, the likelihood of adjusting the exchange rate or changing the peg system appears low in the foreseeable future. However, periodic evaluation of the policy by the relevant authorities remains essential, especially if global market conditions change or major financial crises occur.
Conclusion
The dollar to riyal exchange rate encapsulates the monetary and financial stability in the Kingdom of Saudi Arabia, where the fixed peg policy represents a key strength supporting the economy and providing a reliable investment environment. Thanks to the size of foreign reserves and the precise management of monetary policy by SAMA, the Saudi riyal remains one of the most stable currencies in the region, instilling high confidence in both local and foreign investors for conducting transactions and long-term investments. Nevertheless, it is important for investors to recognize that global economic conditions and US monetary policies remain influential factors that require continuous monitoring. It is always advisable to consult a licensed financial advisor before making any investment decisions related to the exchange rate or the Saudi financial market. For the latest analyses and economic reports on the dollar to riyal exchange rate, you can rely on the SIGMIX platform as a trusted source of financial and economic information.
Frequently Asked Questions
Saudi Arabia adheres to a fixed peg policy of the riyal to the US dollar for decades to achieve financial and monetary stability. This peg facilitates trade, especially since most of the Kingdom's exports and imports are conducted in dollars, and limits fluctuations in local prices. The country also relies on massive foreign reserves (exceeding $700 billion) that allow the central bank to intervene when necessary to maintain the official rate, reinforcing confidence in the economy and attracting investors.
Due to the riyal's peg to the dollar, Saudi Arabia often follows US interest rate policies. When the US Federal Reserve raises interest rates, SAMA raises its local rates to maintain the riyal's attractiveness and prevent capital flight, stabilizing the exchange rate. These changes primarily affect borrowing and investment costs within the Kingdom, but do not lead to a direct change in the dollar to riyal exchange rate due to the fixed peg.
In the official market, the dollar to riyal exchange rate remains at 3.75 with very minor differences not exceeding fractions of a halala during peak times or in global spot markets. These differences are usually due to momentary supply and demand variations in banks or exchange offices and do not reflect a real change in the official rate, which is strictly supported by the Monetary Authority.
The stability of the exchange rate provides foreign investors in the Saudi financial market (Tadawul) with a stable investment environment, allowing them to convert their funds into riyals and purchase stocks without worrying about currency fluctuations. This reduces currency exchange risks when entering or exiting the market, making the investment planning process clearer and contributing to attracting more foreign investments to the Saudi market.
The massive foreign reserves (approximately $700 billion in 2024) give the Saudi central bank the ability to defend the official exchange rate in case of pressures or fluctuations in global markets. These reserves are used to buy or sell dollars when necessary and are considered a fundamental guarantee for the continuation of the fixed peg policy and instilling confidence in the national economy and financial markets.
Part of US inflation is linked to the Saudi economy through the fixed peg, as most imported goods are priced in dollars. If prices rise in the United States, the cost of imported goods to Saudi Arabia may increase, leading to a moderate rise in local inflation. However, the central bank can adjust local monetary policies, such as raising interest rates, to mitigate any negative effects on prices in the local market.
There are no financial instruments in the Saudi market (Tadawul) that allow direct speculation on the dollar to riyal exchange rate due to the fixed peg policy. Futures contracts or specialized exchange-traded funds (ETFs) for this pair are not available. Instead, investors can invest in dollar-denominated financial instruments (such as dollar bonds) or Saudi stocks denominated in riyals, knowing that currency fluctuation risks are extremely limited under the current system.
The dollar to riyal exchange rate can be monitored through the official website of the Saudi Arabian Monetary Authority (SAMA), local bank websites, and financial news platforms such as Argaam and Aghbariya. Global platforms like Bloomberg and Reuters also provide real-time indicators and economic data. For specialized analyses and reports, it is advisable to rely on official sources and trusted economic platforms like SIGMIX.
So far, there are no official indications of an intention to change the peg system between the riyal and the dollar, as government entities emphasize the importance of the monetary and economic stability provided by the peg. The system may undergo periodic review based on developments in the global and local economy, but any potential changes will be announced in advance with measures taken to protect the national economy and investors' interests.
Most Gulf currencies, such as the UAE dirham, Qatari riyal, and Bahraini dinar, are pegged to the dollar with similar policies, but they differ in the size of economic reserves and regulatory procedures. The Saudi riyal is characterized by massive foreign reserves and a strong oil economy, making it more capable of facing crises, while other Gulf countries rely on similar monetary policies but with varying flexibility depending on each economy's circumstances.