Fears of dollar collapse as Saudis take fright - Telegraph

Fears of dollar collapse as Saudis take fright - Telegraph: "Saudi Arabia has refused to cut interest rates in lockstep with the US Federal Reserve for the first time, signalling that the oil-rich Gulf kingdom is preparing to break the dollar currency peg in a move that risks setting off a stampede out of the dollar across the Middle East.

Fears of dollar collapse as Saudis take fright Ben Bernanke has placed the dollar in a dangerous situation, say analysts 'This is a very dangerous situation for the dollar,' said Hans Redeker, currency chief at BNP Paribas.

'Saudi Arabia has $800bn (£400bn) in their future generation fund, and the entire region has $3,500bn under management. They face an inflationary threat and do not want to import an interest rate policy set for the recessionary conditions in the United States,' he said.

The Saudi central bank said today that it would take 'appropriate measures' to halt huge capital inflows into the country, but analysts say this policy is unsustainable and will inevitably lead to the collapse of the dollar peg.

As a close ally of the US, Riyadh has so far tried to stick to the peg, but the link is now destabilising its own economy."

Ooops, another country is about to drop the dollar, in order to avoid collapse with the US, which will further hasten the US's economic downturn...