Oil climbs as the dollar sags
Published 26/10/2010 | 05:00
OIL prices climbed yesterday as the dollar fell against the euro and other currencies.
Benchmark crude for December delivery rose 91 cents to $82.60 (€59) a barrel in midday trading on the New York Mercantile Exchange.
The dollar lost ground against the euro and fell to a 15-year low against the yen. That follows what JP Morgan analysts called a "rather bland" statement from the weekend G20 meeting that said exchange rates should be determined by markets.
"This is certainly nothing new, and the reality is currencies will continue to take a back seat to domestic priorities."
Oil prices tend to rise as the dollar falls, because oil is priced in dollars and becomes more attractive to holders of foreign currencies.
The G20's lack of a firm position on currency devaluation makes it more likely that the Fed next month will announce more action to bolster the US economy, possibly buying government securities, which will inject more money into the system. That's likely to weaken the dollar further and support higher oil prices.
Energy consultants MF Global said in a note to investors that "steady demand for raw materials from China and India are supporting oil".