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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: ggersh who wrote (8396)	6/5/2008 3:17:35 PM
From: LTK007	Read Replies (1) \| Respond to of 71442

Crude Oil Rises More Than $5 After Dollar Drops Against Euro By Mark Shenk June 5 (Bloomberg) -- Crude oil rose more than $5 a barrel as the dollar dropped against the euro on statements that the European Central Bank may boost interest rates to cut inflation. The euro rebounded after ECB President Jean-Claude Trichet said the bank may raise rates next month. Investors looking to hedge against the dollar's falling value have helped lead oil, gold and corn to records this year. The dollar and oil fell earlier this week on signs U.S. interest rates may rise. ``This huge move is attributed to the weaker dollar,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``If the Europeans decide to raise interest rates, the dollar will be back on skid row.'' Crude oil for July delivery rose $5.60, or 4.6 percent, to $127.90 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Oil is heading for the biggest gain since March 26. Futures earlier dropped to $121.61, the lowest since May 15. Futures reached a record $135.09 a barrel on May 22 and are up 95 percent from a year earlier. ``A year ago there would have had to be a disruption or political event to trigger a $5 move, but that's no longer the case,'' said Chip Hodge, a managing director at MFC Global Investment Management in Boston, who oversees a $4.5 billion energy-company bond portfolio. ``The only rational reason is the falling dollar. The fundamentals don't support these prices.'' Brent crude oil for July settlement rose $5.55, or 4.6 percent, to $127.65 a barrel on London's ICE Futures Europe exchange. The contract touched $121.32, the lowest since May 15. Prices reached a record $135.14 on May 22. Rate Policy ``It's not excluded that, after having carefully examined the situation, that we could decide to move our rates for a small amount at our next meeting,'' said Trichet at a press conference in Frankfurt after the ECB left its benchmark rate at 4 percent. ``I didn't say it's certain. I said it's possible.'' ECB policy makers have not followed the Federal Reserve and the Bank of England in cutting interest rates. Oil rose 52 percent since Sept. 18 when the Fed began curbing rates to bolster an economy already reeling from a credit crisis. The Euro advanced 11 percent against the dollar in the period. ``The moment Trichet opened his mouth we saw the dollar reverse course and oil jump,'' said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. ``Monetary policy has been the primary driver of this market this year.'' The euro climbed 1 percent to $1.5595 as of 2:33 p.m. in New York, from $1.5440 yesterday. Pay More ``When the dollar is weak, commodities that are denominated in the dollar become less expensive to buy for those holding other currencies,'' said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut. ``As a result of this we have to pay more in dollar terms to get the commodity that we need.'' Continental Airlines Inc. will cut 3,000 jobs and shrink its jet fleet by 18 percent, becoming the fourth major U.S. carrier to slash payrolls and flights as soaring fuel prices push the industry to its worst losses since Sept. 11. United Airlines, the second-largest U.S. carrier, said yesterday it was shutting its low-fare Ted brand and retiring 70 planes. Raymond James Financial Inc. and Lehman Brothers Holdings Inc. raised their crude-oil price forecasts on June 2 on signs that supply growth will trail demand. ``I know that unless someone discovers a lot of oil, it can go to $150, $200'' a barrel, Jim Rogers, chairman of Rogers Holdings, said in a Bloomberg Television interview. ``The facts are the world is running out of known oil reserves.'' To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net. Last Updated: June 5, 2008 14:47 EDT