Saudi riyal rebounds on report Riyadh to acknowledge Khashoggi death

DUBAI (Reuters) - Saudi Arabia's riyal rebounded against the U.S. dollar early on Tuesday after CNN reported Riyadh was preparing to acknowledge the death of dissident journalist Jamal Khashoggi in a botched interrogation.

The riyal, which had sunk to a two-year low of 3.7526 against the U.S. dollar on Monday because of concern that Khashoggi's disappearance could hurt foreign investment in Saudi Arabia, recovered to 3.7514.

The riyal is pegged at 3.75 to the dollar and moves outside a 3.7498-3.7503 range are rare.

In the one-year forwards market, used by banks to hedge against possible future moves of the currency, the dollar dropped to 50 points against the riyal -- returning to the range of the last few months -- from Monday's high of 100 points.

Citing two unidentified sources, CNN said Riyadh was preparing a report acknowledging Khashoggi was killed as the result of an interrogation that went wrong. The New York Times, citing a person familiar with Saudi plans, reported the Saudi government would blame an intelligence official for a bungled operation.

Blaming Khashoggi's case on mistakes by lower-level personnel would allow the Saudi government to say it never sanctioned his disappearance, and could help to reduce international outrage over the affair, a banker in the Gulf said.

(Reporting by Andrew Torchia; Editing by Richard Pullin and Raissa Kasolowsky)