Qatar currency forwards hit 3-yr high, debt yields up on Syria
* Forwards up in thin trade
* Tight liquidity pushes T-bill yields up
* Central bank to sell $1.1 bln in local bonds, sukuk
DUBAI, Sept 5 (Reuters) - Qatar's one-year currency forwards jumped to a three-year high on Thursday and yields rose at a weakly-supported debt auction as foreign investors responded to concerns about Syria by cutting exposure to the Gulf Arab region.
One-year riyal forwards rose as high as 160 points bid on Thursday from Wednesday's close of 115, traders said. That suggested a 0.4 percent weakening of the riyal from its peg of 3.64 to the dollar over a one-year period.
"It's basically tightness of liquidity onshore. Together with what's happening in the region it also means people would be buying dollars," said a trader, who declined to be named due to briefing rules.
Relatively low liquidity in the Qatari forward market exaggerated the market move, he said: "There was a bit of a panic. My personal view is that this is a bit overdone."
By comparison, Saudi one-year forwards touched 30 points bid on Thursday before bouncing back, up from Wednesday's close of 15 but still below the last week's peak of 37.
Unease over a possible U.S.-led military strike against Syria has triggered sharp losses on Middle East and other emerging markets and kept oil prices high.
U.S. President Barack Obama faced growing pressure on Thursday not to launch a strike at a G20 summit on the global economy that was eclipsed by the conflict.
The Qatari Treasury bill auction, conducted on Tuesday with results announced by the central bank (QCB) on Thursday, drew demand of just 4.5 billion riyals, barely surpassing the bank's monthly volume of 4 billion riyals ($1.1 billion) for draining excess liquidity.
Yields on the OPEC state's 182-day T-bills increased to 1.15 percent, the highest since October 2012, from 1.04 percent in the previous auction on Aug. 6, while those on 91-day bills rose to a four-month high of 0.87 percent from 0.82 percent.
Yields on 273-day notes edged down to 1.22 percent from 1.23 percent last month.
"There is a bit of tightness in the money market. A lot of money is flowing out of the Gulf region," another trader said. "They (foreign depositors) will be reluctant to renew it before Syria settles down."
The central bank has conducted monthly auctions of 91-, 182- and 273-day T-bills since 2011, with the volume of funds drained through the sales staying unchanged.
The QCB plans to sell another 4 billion riyals in three and five-year local currency government bonds and sukuk on Sept. 10 in a quarterly issue it allocates directly to banks, it also said on Thursday.
Traders said that demand might be higher than in the T-bill sale because the paper was longer-dated.
($1 = 3.6416 Qatar riyals) (Editing by John Stonestreet)
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