With the political situation in the Middle East and part of Africa in political turmoil, many of the global investors are staying out of the region and allocating their portfolio elsewhere into Asian and European markets.
Bahrain is one of the country plagued with such turmoil. Starting Feb 2011, students and blue collar workers started to make their unhappiness heard, lamenting on the high unemployment rate and lack of political freedom. Along religious line, the Shiite Muslims, spurred by the regional unrest, started to protest against the mainly Sunni government (Sunni Muslims account for about 90% of the Muslims in the world today, while Shia Muslims largely made up the remaining 10%).
As a result, the 2011 F1 race in Bahrain is now postponed indefinitely due to the political standoff between the opposition and the Bahrain Government. There have also been reports of human rights violation in the Bahrain City of Manama where the police forces quarantined a public hospital and used physical force against civilian doctors and nurses, putting the Bahrain government to shame, resulting in the panic selling of the Bahrain Dinar. This is exacerbated in late March 2011, when the Central Bank of Bahrain, located within Manama's commercial district has been closed off. This further rocks the confidence in the Bahrain Dinar and plunging the Dinar to a new low.
As it stands now, the Bahrain Dinar is set to further depreciate. Currently, 1 Bahrain Dinar trades at 2.6525 US Dollar, or 1 US Dollar (USD) = 0.37701 Bahrain Dinar (BHD). It is expected that the Bahrain Dinar will further depreciate and trade at 1 US Dollar (USD) = 0.39000 Bahrain Dinar by the third quarter of 2011, if the political impasse is still unresolved. Besides the depreciation of the Dinar, it is noted that trading volume had shrunk drastically by 15% since the start of 2011. Forex traders are left wondering if there is still a ready market to sell off the Dinar without getting a big cut off the Bid-Ask spread in the forex market.
Most political analyst believe that it is unlikely for the Bahrain Government to make any key changes in policies or the way political parties are elected into the government. This will probably mean that further protests will be quelled by force rather than through negotiation. Looks like it will also be an equivalent forceful drop of the Dinar value.
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