As Oil Goes, So Goes the Dollar??
From the Economist: Oil-exporting countries, whose current account surpluses which are far larger than China’, cast a long shadow over financial markets these days. The impact of petrodollars on the ordinary sort is hard to pin down.
Economists at Credit Suisse First Boston, for example, have calculated that for every increase of $10 a barrel in oil prices, the daily demand for dollars just to carry out transactions increases by $300m (though other transactions may be crowded out because energy-consumers don’t have money for both).
More important is where the petrodollars end up invested. Though credible figures are elusive, a fair whack has certainly found a home in dollar-denominated assets, some in corporate bonds and some in short-term paper. For the moment, the
sharp rise in oil prices this year may well have helped the dollar.
FYI, according to the latest COTS data, "non-commercial traders” have longer net positions in dollar futures than almost ever before, and "commercial traders" have shorter net positions in dollar futures than almost ever before, sniff, sniff.
We think as the dollar strengthens further, and rates increase, oil will pull back further and the petrodollars will come back into our bond market. Gates, Buffet and Soros all had their lunch dumped on them this year by shorting the dollar, perhaps the commercial traders are about to get theirs too. We repeat one of our favorite mantras, do not go against the dollar.
Economists at Credit Suisse First Boston, for example, have calculated that for every increase of $10 a barrel in oil prices, the daily demand for dollars just to carry out transactions increases by $300m (though other transactions may be crowded out because energy-consumers don’t have money for both).
More important is where the petrodollars end up invested. Though credible figures are elusive, a fair whack has certainly found a home in dollar-denominated assets, some in corporate bonds and some in short-term paper. For the moment, the
sharp rise in oil prices this year may well have helped the dollar.
FYI, according to the latest COTS data, "non-commercial traders” have longer net positions in dollar futures than almost ever before, and "commercial traders" have shorter net positions in dollar futures than almost ever before, sniff, sniff.
We think as the dollar strengthens further, and rates increase, oil will pull back further and the petrodollars will come back into our bond market. Gates, Buffet and Soros all had their lunch dumped on them this year by shorting the dollar, perhaps the commercial traders are about to get theirs too. We repeat one of our favorite mantras, do not go against the dollar.
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