Speculation undermines national currency [Archives:2002/12/Business & Economy]

March 18 2002

Yemen is in dire need of a new monetary system to stop random speculation which is causing our national currency to deteriorate.
Speculation problems have been on the rise in Yemen. So while foreign currencies have been strengthening, the YR has been sagged against the USD.
It seems the laws at the Central Bank of Yemen are encouraging banking activities akin to a hobby, not a profession, and as a result those who practice banking activities have been seeking to achieve excessive wealth.
Speculation is one of the easiest ways to gain profits and to ameliorate the stocks. But as an economical financial activity, speculation is also supposed to be under the control of monetary bylaws and market laws.
A public opinion poll has been conducted at exchange markets, and exchangers say that speculation has been widely expanded at the Yemeni money markets because of traders’ orientation to the banking sector. Such orientation has greatly effected the stock market exchange, and has resulted in the deteriorating of the national currency.
Money exchangers believe about 25 % of those who work at the banking sector have restored speculation because of the rapid windfall. They say that speculation lies in the fact that it is in need of purchasing shares and developmental enterprises. As a result, investors prefer to gain a rapid windfall through speculation, instead of investing, which they see as a trap.
It is noteworthy that speculation in the field of properties has been recently recessed particularly after the bankruptcy of the private companies. This can be attributed to the unavailability of proper and legal bases. In this context, businessmen of the private sector prefer to work in the field of the speculation through purchasing currencies that are undervalued, and then selling them at high prices.
It is also noticeable that speculation is widely practiced in the pilgrimage seasons, before Eids and during mid summer vacations. The main deterioration of the national currency, the emergence of the financial crises and the high increase of inflation has greatly affected the national currency due to this random speculation.
Its time for a new way.