The Yemeni riyal's exchange rate remained relatively stable and saw gradual improvement against other currencies in June, the Central Bank of Yemen said in its most recent exchange rate newsletter.

Mohammed Saad al-Rawdhi, deputy governor of the Central Bank of Yemen, credited "the Central Bank's role in supervising and monitoring the market [banks and exchange companies], in regulating exchange rates and in co-ordinating with commercial banks to prevent the manipulation of the price of the riyal".

Al-Rawdhi told Al-Shorfa that commercial banks play a positive role in opening credit lines to finance import operations, "which had a positive impact on the exchange rate of the riyal against other currencies".

The bank also took a number of other measures to help stabilise the riyal's exchange rate, he added.

"The Central Bank intervened by pumping large sums of money into the market to maintain exchange rates, and it provided the necessary foreign currency to cover what was needed to import basic commodities like wheat, flour and sugar, which in the past increased demand for the dollar on the market and consequently caused the dollar's price to rise," al-Rawdhi said.

In addition, "The Bank played a role in supporting [the import] of oil derivatives, which requires large sums of hard currency, and thus eased the demand for hard currency," he said.

Overall, "The government's role in controlling costs was positive and helped stabilise the riyal's exchange rate," he said.

Current stability and confidence

The month of Ramadan sometimes brings a decline in the value of the riyal as a result of high demand for the dollar, which merchants need to meet consumer demands, said Saleh Naji, accounts manager at the company Ard al-Saeeda.

But demand for the dollar has decreased this year, he said.

"The demand for the dollar on the market is low compared to the same period last year -- a period during which the price of the dollar is usually at its highest because it is the import season for Ramadan and religious holidays," he told Al-Shorfa.

Dr. Hammoud Aklan, adviser to al-Tadamon Islamic Bank, told Al-Shorfa, "The political and psychological stability that took hold after the revolution and the beginning of the implementation of the Gulf initiative alleviated psychological concerns, re-established stability and restored the public's confidence in the banking system, which last year reeled from huge withdrawals and resulting losses."

However, he said the market was not yet "in full gear" and that" the growth rate is slow because imports are limited to consumer goods".

He added that "much less emphasis is being placed on materials used for development, building and construction projects. This reflects the level of demand for hard currency needed to cover the credit required to import those materials."

Dr. Taha al-Faseel, an economics professor at Sanaa University, said there are a number of other reasons for the stability of the riyal's exchange rate and its gradual improvement against other currencies.

"The supply of foreign currency exceeded demand due to the lack of import activity because of the country's conditions and merchants' apprehension about the situation," he told Al-Shorfa.

Also, "food, humanitarian and financial aid from some donor countries and organisations shored up the currency exchange market in Yemen," he added.

Al-Faseel also said that "expatriate remittances created surplus liquidity in foreign currency, especially the Saudi riyal and US dollar."