Oil, Geopolitics and the weak Dollar

by Laura Ehrenberg-Chesler on May 5, 2011

in Commodities,currencies,Energy,Geopolitical

The recent weakness in the U.S. Dollar may be attributed to several factors.  First, with rates so low, carry traders can finance their speculative trades in dollars at interest rates close to 0%.

The second factor is that oil rich foreign dictators or autocrats, in places like Russia, Venezuela and Iran, are getting more dollars as a result of rising oil prices, since oil trades in dollars.  However, they want to keep fewer of their assets in dollars in case their assets are frozen by the U.S. government.  This recently happened to Ghadafi in Libya, and Assad in Syria.

There may be one other factor contributing to dollar weakness, and that is the decline of the United States as a global power.  We would like to believe that this is a temporary phenomenon.

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