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Jeddah - Yasmine El Tohamy - RIYADH: The US Federal Reserve’s most aggressive interest hikes since the 1980s have pulled several currencies across the world to new lows.
On Sept. 21, the US Federal Reserve hiked the short-term interest rates by 75 basis points to 3 to 3.25 percent.
Since the announcement, several investors took their money out of other markets to invest in the US, thus pulling global financial markets to a state of volatility.
The Chinese onshore yuan is sliding toward 7.2 per dollar, down 10.9 percent from the same date last year, while the People’s Bank of China is setting up defenses to protect the currency, according to Reuters data.
On Sept. 26, the Indian rupee plunged 8.7 percent year-to-date to an all-time low of 81.67 against the US dollar.
Soon after the Fed hike, the British pound started falling, and it reached an all-time low on Sept. 26 before showing signs of recovery. The fall of the British pound is also due to the tax cuts announced by the new Liz Truss government.
At one point on Monday, the pound sank as low as $1.0327, surpassing the previous record low reached in 1985, before recovering some of its value.
The Pakistan rupee also nosedived following the Fed hike, with one US dollar now equal to 233.79 Pakistani rupees.
Other major currencies like the Egyptian pound and the Australian dollar fell 19.5 percent and 11.1 percent year-to-date respectively.
Meanwhile, Chicago Fed President Charles Evans said on Tuesday the Federal Reserve will need to raise interest rates to a range between 4.50 percent and 4.75 percent.
Saudi Arabia has a fixed exchange rate regime, with a dollar peg.
The spot dollar/riyal exchange rate has remained unchanged at 3.75 since June 1986, as the Saudi Central Bank provides dollars to the domestic banks to meet the commercial and financial demand of the private sector.
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