Reuters said on 5 September that Qatar’s Central Bank (QCB) has asked banks not to exchange its currency with entities outside the country without prior permission, which bankers say aims to end the riyal divergence against the dollar.

The Qatari riyal, officially pegged at 3.64 to the dollar since 2001, has been undervalued since mid 2017, when four Arab countries boycotted Doha due to a political dispute, which was resolved in early 2021.

In the letter sent to the treasury managers of local banks, Reuters said that QCB directed the banks not to enter into any barter deals to obtain riyals or dollars with any entity outside Qatar.

In response to a Reuters query, QCB said that it “is not taking any action to limit the ability of banks to enter into barter transactions with counterparties.”

“These matters are left to the commercial judgment and risk management of the banks,” the bank representative said, adding that any such directive would be posted on its website.

A currency swap agreement involves exchanging one currency for another within a specified period and paying a premium. It is a tool to secure a fixed exchange rate or hedge against currency fluctuations.

Last year, Saudi Arabia, the United Arab Emirates, Bahrain, and Egypt ended a row with Doha that saw the four countries cut political, economic, and travel ties with Qatar over allegations that it supports Islamist militants, which Doha denies.

During the dispute, tiny but wealthy Qatar, among the world’s largest gas exporters, sued banks in the United Arab Emirates and Saudi Arabia, accusing them of harming its economy through foreign currency manipulation.

Official data showed that foreign reserves and hard currency liquidity at the Qatar Central Bank rose by about 3.8 percent in the past two years to 211.3 billion riyals in July from 203.6 billion riyals in 2020.

“It does not make sense that the Qatari riyal is still not circulating based on the peg,” said a Gulf economist, who asked not to be named due to the sensitivity of the matter.