Canadian dollar whipsaws as row with Saudi Arabia escalates
Loonie drops on latest report that Saudis are selling all Canadian stocks and bonds
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Saudi Arabia is considering additional measures against Canada amid reports it plans to unload its holdings of Canadian stocks and bonds as a dispute over women’s rights activists intensifies.
Foreign Minister Adel Al-Jubeir, speaking at a news conference in Riyadh, said there was no need for mediation in the dispute. “Canada knows what it needs to do,” he said.
The Canadian currency dropped as much as 0.5 per cent to 76.21 US cents after the Financial Times reported that the Saudi Arabia central bank and state pension funds have instructed their overseas asset managers to dispose of Canadian assets starting Tuesday. The loonie rebounded shortly afterward to trade 0.1 per cent weaker at 10:03 a.m. in Toronto.
A source at a Saudi bank told Reuters the bank was contacted by the central bank on Wednesday afternoon asking for information about all their Canadian exposure – investments in Canada and foreign exchange positions.
The bank had received no instructions to sell assets as they do not have any exposure there, the source said.
Saudi Arabia suspended diplomatic ties and halted new trade dealings late Sunday following comments by Canadian Foreign Minister Chrystia Freeland criticizing the kingdom for arrests of women’s rights activists. The kingdom has since escalated its moves against Canada, suspending flights to Toronto and ordering the return of thousands of students who are studying at Canadian schools.
Russia voiced support for Saudi Arabia in its worsening row with Canada on Wednesday, telling Ottawa it was unacceptable to lecture the kingdom on human rights.
Russian Foreign Ministry spokeswoman Maria Zakharova said that human rights should be promoted with respect for specific national customs and traditions.
“We have always said that the politicisation of human rights matters is unacceptable,” Zakharova said.
“What one probably needs in this situation is constructive advice and assistance rather than criticism from a ‘moral superior’,” she said.
Since rising to power in 2015, Crown Prince Mohammed bin Salman has courted Western allies to support his reform plans, offering billions of dollars of arms sales and promising to fight radicalism in the kingdom.
But the row threatens to slow Riyadh’s foreign investment drive, a campaign already unsettled by a series of assertive foreign policy initiatives by the top oil exporter.
Inflows slowed in recent years mainly due to low oil prices, but regional turmoil doesn’t help, critics of the government say.
“Saudi Arabia simply cannot afford to alienate any other sections of the global community in the midst of its unpopular military engagement in Yemen, its indirect confrontation with Iran,” commentator Jamal Khashoggi wrote in the Washington Post.
Saudi’s asset sales may not have a big impact on the Canadian currency, although seasonally thin trading in August could exacerbate that effect. Saudi holdings of Canadian dollar reserves are between $10 billion and $25 billion, with the upper end of that estimate representing 10 per cent of daily Canadian dollar volumes, according to estimates from the Canadian Imperial Bank of Commerce.
“That’s enough to leave a mark on the loonie in August when volumes are typically lighter,” said Bipan Rai, North American head of foreign exchange strategy at CIBC. Still, Rai said the impact on the currency should be “ephemeral” as bilateral trade between Saudi Arabia and Canada is small.
So far this year, Canada has exported $1.4 billion in merchandise goods to Saudi Arabia and imported $2 billion, according to Statistics Canada data.
With files from Reuters
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