Are the region’s currency pegs still credible?

Policymakers across the region have drawn down foreign exchange reserves this year in order to prop up currency pegs and, in the Gulf countries at least, this can be sustained for some time to come. Even in Bahrain and Oman, financial support from their neighbours will help to keep pegs intact. Jordan’s, while more vulnerable, is probably secure. But pressure continues to build on currencies in Algeria and Lebanon – we think that the Lebanese pound’s official rate will fall by as much as 80% against the dollar.