Saudi reserves and the PIF, lessons from the EGP fall

The recent sharp decline in Saudi Arabia’s foreign exchange reserves reflects, to a large degree, a shift in where the Kingdom holds its foreign assets rather than them being relinquished to prop up the riyal. That said, this does mean that it will be increasingly difficult in the coming years to fully assess the sustainability of the dollar peg. Meanwhile, the further fall in the Egyptian pound this week provides investors with a clearer idea of the nature of the country’s exchange rate policy.