(AP) Oil dips to near $119 on stronger dollar

Discussion in 'Wall St. News' started by ktgtrader, Aug 8, 2008.

  1. I tend to see it as the dollar affecting all commodities. Interest rate differentials can put pressure or a floor on currencies. The fed slashed rates so quickly versus other major currencies like the Euro, that it caused a huge flight from the dollar. The Euro is not much of a better currency replacement, so money flowed into commodities in general. Oil was just the headline commodity that everyone talks about. On top of that, you have a US policy of wanting a weaker dollar via China revaluing the yuan. So, China exacerbated the slide in the dollar versus other currencies since they were selling dollars and buying a basket of currencies. On top of that, you had Iran start an oil futures exchange early this year that priced oil in euros.

    The price shock of the devalued dollar caused an imbalance in global commodity prices as demand remained the same, or even increased as the dollar price of these commodities became cheaper to other currencies, thus creating a huge wave of buying interest and exacerbated by a one-sided speculative binge from money funds around the world into commodities.

    Now you're seeing expectations of interest rate differentials changing. The Euro zone will not be raising rates soon, and may soon be cutting, while the US may come out of the recession as Europe enters into it. The US dollar may see increasing rates, as other countries begine to cut rates. The dollar confidence is coming back, as commodities will not rise with a strengthening dollar. As the dollar strengthens, commodity prices in dollars become more expensive to other currencies, thus slowing demand, at the same time reducing speculative expectations of rising prices.

    In conclusion, my logic says that the dollar affects oil and commodity prices. Not oil and commodities affecting the dollar.
     
    #11     Aug 10, 2008
  2. Yeah..what he said!
     
    #12     Aug 10, 2008
  3. Seriously, is there some manipulation going on at the background?
     
    #13     Aug 12, 2008
  4. All markets are. I think it would be healthy for, us to consolidate in the 13-17 range for at least a few weeks.
     
    #14     Aug 15, 2008