Here’s yet another indication that the U.S. Dollar’s decline is imminent.
jg – October 6, 2009
Dollar Falls on Report Gulf States May Stop Using Greenback
By Yoshiaki Nohara and Ron Harui
Oct. 6 (Bloomberg) -- The dollar fell the most in two weeks against the euro after the Independent newspaper said Arab states may switch to a basket of assets including the euro, yen and gold for oil trading.
The dollar declined against 15 of its 16 most-traded counterparts as Asian stocks rallied and the Independent reported Persian Gulf states along with Japan and China are discussing dropping the greenback for oil trades, citing unnamed sources. The yen rose after Japan’s finance minister said he told Group of Seven leaders that weak-currency policies were undesirable. Australia’s dollar surged after the nation’s central bank unexpectedly raised benchmark interest rates.
“Eventually there will be a move to non-dollar commodity contracts, and it may be the next big risk for the dollar,” said Ben Simpfendorfer, chief China economist for Royal Bank of Scotland Group Plc in Hong Kong. “At the same time, I don’t want to overplay the importance of the story. There’s no credible sources there.”
The dollar dropped 0.6 percent to $1.4738 per euro at 7:28 a.m. in London, the biggest decline since Sept. 22, from $1.4648 in New York yesterday. The U.S. currency also fell 0.6 percent to 89.01 yen, the most since Sept. 25, from 89.53 yen. The 16- nation euro was little changed at 131.06 yen.
Oil-producing nations are seeking to move to a basket of assets, including the yen, yuan, euro and gold to settle transactions, the U.K.-based Independent said, citing Middle Eastern and Chinese banking officials it didn’t name.
‘Undermining the Dollar’
Meetings to discuss the transition have already been held by finance ministers and central bank governors from Russia, China, Japan and Brazil, the newspaper reported.
“The very fact that such an idea is being entertained is undermining the dollar,” said Dariusz Kowalczyk, chief investment strategist at SJS Markets Ltd. in Hong Kong.
Denominating in a basket of currencies would be a “recipe for confusion” among the oil-producing Gulf Cooperation Council and its customers, said John Vautrain, senior vice president at oil industry consultants Purvin & Gertz Inc. in Singapore.
“If the GCC did, that would just be very messy,” Vautrain said. “If you do something that makes your buyers unhappy they will reduce your price. And that’s not in anybody’s interest in the GCC.”
The greenback pared losses after Saudi Central Bank Governor Muhammad al-Jasser said his nation hasn’t held talks with other oil producers and consumers on shifting away from the dollar.