At the end of 2017 inflation is expected to reaching at 5.7 according to the negative rate. Inflation rate is considered as the biggest factors for affecting the exchange rates of the Saudi Arabia. According to the parity theory Inflation rate can be determined by the purchasing power the rate of the exchange are adjusting for making the cost of the services and goods. It is also follow the one price of the law. By declining the oil prices the inflation also will decrease because if the rate of inflation is lower in Saudi Arabia tan the purchasing power of its money will be decrease for the domestic goods. The currency should not depreciate for restoring the parity according to the abroad goods prices.  For the excess amount which are equal to the foreign inflation along the domestic inflation the currency amount must be appreciate (Hussain 2017).

References of Inflation of Saudi Arabia’s Currency and the U.S. Dollar

Blanchard, O. J., & Riggi, M. 2013. ". Why are the 2000s so different from the 1970s? A structural interpretation of changes in the macroeconomic effects of oil prices." Journal of the European Economic Association 11 (5): 1032-1052.

Hussain, M., Zebende, G. F., Bashir, U., & Donghong, D. 2017. ". Oil price and exchange rate co-movements in Asian countries: Detrended cross-correlation approach. Physica A:." Statistical Mechanics and its Applications 46 (5): 338-346.

SRSROCCO. 2017. Low Oil Prices Continue To Decimate Saudi Arabia’s Currency Reserves. IN ECONOMY, ENERGY, NEWS.

Wilson, P. W., & Graham, D. F. 2016. Saudi Arabia: The Coming Storm: The Coming Storm. Routledge.