Omar Chatriwala / Doha News

Photo for illustrative purposes only.

June 29: This story has been updated to reflect the fact that Travelex has now resumed buying Qatari riyals 

Many banks and foreign exchange companies outside of Qatar are now refusing to buy Qatari riyals, Doha News has learned.

The change has caught many people off guard. It comes after rating agencies lowered Qatar’s credit rating and put it on “negative watch” amid an ongoing Gulf dispute.

Several residents traveling in Europe, the US and Asia have contacted Doha News saying they have been unable to exchange Qatari currency in the countries they were visiting.

However, not all banks in all countries are affected. Exchanges in Jordan and Lebanon, for example, are still operating normally.

No exchange

One resident who is holidaying in the US this month told Doha News that he has been unable to exchange any of his riyals:

“I’m in (Los Angeles) and I tried to exchange Qatari riyals at multiple banks (US Bank, Bank of America, Chase etc.) and they’ve informed me that a directive was sent out to all US banks not to accept Qatari Riyals at all.”

Another reader reported not being able to exchange riyals in the Philippines, despite trying numerous banks and exchange houses:

“All the banks and all the money changers here in the Philippines are telling me that Qatari money has no rate,” she said.

Several people in other countries have had similar experiences:

Confirmation of issues

When contacted by Doha News, the UK bank Halifax Bank of Scotland (HBOS) confirmed that they were not buying riyals from customers.

A staff member from HBOS said that the bank had stopped buying Qatari riyals “as there was no market for selling them.”

Similarly, Travelex told Doha News that the firm had stopped purchasing riyals from customers for a period, before deciding to begin again on June 29:

“Travelex is pleased to announce it has resumed purchasing Qatar Riyal (QAR) globally. Due to business challenges, purchasing of this currency was suspended in some markets for a short period” it said in a statement.

Recent news reports also suggest that customers are experiencing widespread problems exchanging Qatari riyals in India, Sri Lanka and Pakistan.

Negative credit watch

On a related note, S&P Global Ratings lowered Qatar’s long-term credit rating one level this month.

And Fitch put it on negative watch a few days later on June 12. It cited the GCC crisis and the ensuing air and land border boycott by Saudi Arabia, the UAE and Bahrain.

Explaining its decision, S&P said that it was worried that the crisis would “exacerbate Qatar’s external vulnerabilities and could put pressure on its economic growth.”

The uncertainty has many people worried, according to financial analyst Omar Mohammed of international money transfer firm Imperial FX.

The currency expert told Doha News that there was “increased concern” in the financial community that Qatar would enter “a persistent economic crisis.”

He continued:

“The Qatari Riyal was trading on the futures market at an annual low, and they have recently been placed on a negative credit watch because portfolio investment funds have left the country so quickly.

Oil prices have fallen and experts are now voicing their concerns over the sustainability of Qatar’s energy revenues,” he said.

Currency depreciation

Mohammed added that exchanging riyals is now unprofitable for many banks. This is because the currency recently depreciated against the US dollar, which it has been pegged to since July 2001.

The Qatar Central Bank (QCB) attempts to keep the riyal fixed at around 3.64 per dollar. But it recently reached 3.76  – its weakest level on record, according to Bloomberg data.

However, the riyal rallied this week. And despite this dip, Qatar’s Finance Minister Ali Shareef Al Emadi said that Qatar has sufficient foreign-currency reserves to defend the peg.

Omar Mohammed told Doha News that while the depreciation was affecting demand, it wasn’t the only factor at play at exchange houses:

“The banking corridors used by exchange firms are also being negatively affected, as often, currency was exported through the UAE to Qatar and this is no longer the state of play.

This has meant that in some cases, the transfers are taking longer because new routes are being found.”