Qatari banks to reduce dollar sales to foreign lenders

Bloomberg

Some Qatari banks are becoming less willing to sell dollars to foreign lenders amid a lingering regional standoff with a Saudi-led alliance, according to people familiar with the matter.
Foreign exchange activity between local and international banks is almost at a standstill, the people said, asking not to be identified because the matter is private. The central bank is still providing dollars
to local lenders to meet domestic
business needs at the pegged rate of
3.64 riyals per dollar, they said.
To get dollars to fund imports and other commercial activities for local clients, foreign banks are using the offshore market to buy the US currency at a higher rate and may have to pass these costs on to clients, some of whom are in Qatar, the people said.
The Qatari riyal fell as low as 3.80 versus the dollar in the offshore market on Monday, the lowest since 1988, according to data compiled by Bloomberg.
“It’s more about banks being more prudent in the face of extraordinary circumstances than it being a reflection of a liquidity squeeze,” said Mohamed Abu Basha, Cairo-based economist at investment bank EFG-Hermes. “The offshore market is mostly used by multinationals trying to hedge, with little trace of speculators. If you are an entity in Qatar and you can’t get dollars at 3.64 then that would be a problem. This hasn’t happened yet.”
Qatari lenders are coming under pressure after Saudi Arabia, the United Arab Emirates, Bahrain and Egypt severed their diplomatic and transport links with the gas-rich state, because of supporting extremist groups. Banks from these countries are said to have since pulled deposits from Qatar, refused to roll over holdings and stopped any new business with Qatari institutions.
Qatar pumped almost $40 billion to support the economy and financial system in the first two months of the standoff, Moody’s Investors Service said.