Weak dollar affects Oil Holdings

**intelligent** Mon Dec 11, 2006 2:50 am

Weak dollar affects Oil Holdings
Since dollar continues to be in declining position, oil producing countries have reduced their business with the U.S currency market and shifted their way to the Euros, sterling’s and Yen’s which are making a big way in the currency markets. The BIS report stated that the speculation in the U.S currency market will add more pressure to the already pressurized U.S currency market.

In December the U.S dollar downfall is more. Owing to this fact, some countries started their oil holdings with other currencies rather than the U.S dollar. As a result the holdings of U.S dollar which were 67% came down gradually to 65%. On the other hand, the other currencies like Euro have increased their oil holdings rapidly from 20% to 22%. Overall, Opec’s Dollar deposits fell by $5.3bn, while Euro and Yen deposits rose $2.8bn and $3.8bn, respectively. In order to make the U.S dollar strong, the Fed must re-think on the interest rate policy and the global imbalances.

**patanx** Mon Dec 11, 2006 2:21 pm

The dollar's decline was blamed for the "crisis mentality" that had the stock market staggering the past week.

Rapid money growth in Europe means higher European interest rates and a lower U.S. dollar.

A scary new monetary phenomenon double-digit money growth is sweeping the developed world. In Britain, for instance, money growth is now 14.5% above a year ago. Sweden's money supply is up 14.4% over last year. For the entire euro region, the broad measure of money is up 8.5%. In Australia, the growth rate is 11.2%.

Here is what some investors expect: Interest rates in Britain and the euro region will be raised. In the short run, currency markets are all about interest rate returns. Therefore, as interest rates rise in Europe.

I expect a near-term decline in the U.S. dollar as higher European interest rates will make the euro more attractive.

**intelligent** Tue Dec 12, 2006 1:57 am

will the U.S currency market recovers itself if the Federal Reserve increases the interest rates?