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Dubai: Qatar's central bank sold its first certificates of deposit (CDs) last week in an auction designed to mop up some liquidity as investors bet on Gulf currency revaluations, a central bank official said on Monday.
The auction of one billion riyals ($275 million) worth of 91-day CDs took place on March 4, with maturity on June 3, said the official, who declined to be identified.
The CDs were sold at a coupon rate of three per cent and the best rate received was 1.75 per cent, the official said. The central bank had not yet decided when it could sell CDs again, the official said. "Banks have a lot of liquidity and we are trying to serve their needs."
Investors have piled into Qatar riyals since Qatari Prime Minister Shaikh Hamad Bin Jasem Bin Jabr Al Thani told Reuters last month Qatar was studying revaluing its riyal among options to fight inflation which stood at 13.74 per cent in the fourth quarter.
"Money supply is growing very quickly in Qatar as people sell dollars and buy local currencies," said one Qatari banker, who declined to be identified.
"The central bank is trying to manage money supply with new money-market instruments," the banker said.
Money supply in Qatar, which has the world's third-biggest natural gas reserves, grew 29 per cent in the year to June, the latest available figure.
Forward rates
Forward rates yesterday showed investors betting the riyal will rise 4.5 per cent in one year and 7.5 per cent in two years.
Qatar is constrained in its fight against inflation by the dollar peg, which forces it to track US monetary policy when the Federal Reserve is cutting interest rates to ward off recession. Gulf economies, by contrast, are surging on a five-fold rise in oil prices since 2002.
The central bank has raised the reserve requirement for banks twice since December to prevent lower borrowing costs from fuelling inflation.
The government also froze rent increases on many contracts to slow down housing price inflation.
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