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Investors Keep Watchful Eye on Saudi Riyal

How bad is the oil bust? Bad enough that some investors are raising once-unthinkable questions about Saudi Arabia’s currency.

Oil prices have tumbled, the dollar has rallied and worries abound on growth in China and other emerging-market nations. Now, some analysts and traders are weighing whether these pressures might force Saudi Arabia, the world’s top oil exporter, to adjust a peg to the dollar that has stood for nearly three decades.

For now, any move seems unlikely. The government has said it remains committed to the arrangement, which fixes the riyal at 3.75 to the dollar, and analysts said the nation’s large foreign-exchange reserves are likely to give it considerable latitude to retain the peg even if this year’s emerging-market rout intensifies.

But some investors said a deepening slump in oil prices could intensify economic pressure on the Saudi government, which already has swung to a trade deficit after years of running surpluses. Some say the riyal will pose a tempting target for speculators until the government revamps and modernizes the economy.

Another potential draw for the trade: the big profits that could accrue from a devaluation, even though most traders view such a move as a long shot for now.

The Saudis “need prices of $50 a barrel” to balance their budget, said Scott Minerd, global chief investment officer of Guggenheim Partners, who notes that Nymex crude prices haven’t consistently traded above that level for months.

On Tuesday, Nymex crude slumped 34 cents to $45.55 a barrel. Guggenheim is among those that have examined betting that the peg will be adjusted, Mr. Minerd said, but he declined to say if the firm is currently holding such investments.

Much of the Saudi government’s expenses, such as wages, are in riyals, but most of the nation’s revenue comes from oil sold in U.S. dollars. As such, a devaluation that boosts the value of the dollar against the riyal could provide short-term relief for budget...