On Monday, US West Texas Intermediate crude and Brent crude futures tumbled to a 12-year low amid global overproduction and new concerns over China's stock market.
The fall in oil prices combined with declining government reserves are among major factors that may lead to the devaluation of the Saudi riyal.
Investors speculate that Saudi Arabia will soon have to change the exchange rate between the riyal and the dollar, a currency trader of a large bank in the Gulf region said.
At the same time, Jean-Michel Saliba, an economist from Bank of America Merrill Lynch said that such a scenario is unlikely if the oil price stabilizes at the current level. Another analyst Jason Tuvey also argued that Saudi Arabia would rather cut spending than devalue its currency.
The exchange rate between the dollar and the riyal has remained unchanged at 3.75 since June 1986. A fixed rate to the US dollar helps the country to control inflation and simplify trading.
