Saudi Arabia's riyal surged to a 21-year high against the dollar on Thursday as speculation the kingdom may ditch the currency's peg to the dollar fuelled a frenzy of riyal buying.

This pushed the riyal to its highest level since December 1986 at 3.7405 per dollar according to Reuters data.

On Wednesday Reuters quoted the central bank as saying it would not match this week's 50 basis point rate cut by the US Federal Reserve.

'If the spot breaches 3.74 and there is no intervention from the central bank that will mean they will have allowed a revaluation,' said Koceila Maames, economist at Calyon in Paris. 'But I think they will intervene.' -Reuters