Saudi Arabia's monetary authority has sent a message to speculators, who have pushing Real forward lower against Dollar, betting lower oil price and growing fiscal imbalance would push Saudi Arabia to with draw from its Dollar peg, which is fixed at 3.75 Real per Dollar.

Currently bet on Saudi Arabia's peg break is highest on record, leading to considerable strain for monetary authority to maintain the peg. While weakening of Saudi Real could be beneficial for Saudi Arabia in the medium term, any peg break might lead to short term turmoil and is seen as source of stability by Saudi officials including the royal family. Last year, Saudi Arabia announced an ambitious austerity plan to reign on deficit, which has reached 20% of GDP.

In a statement,

Saudi Arabia's monetary Authority (SAMA) governor said, he remains committed to its mandate of maintaining Dollar/Real peg, backed by full range of monetary policies including its FX reserve.

However, we expect market could continue to pose doubts on the current exchange rate and would continue betting in favor of a re peg at other levels as long as oil price fails to show signs of recovery.

Brent oil is down another -1.7% today, trading at $32.75/barrel.