$103 Crude Oil and the Declining Dollar

So crude oil prices are now well established above the $100 mark - my latest data chart for Brent crude oil shows the fuel trading close to $103 a barrel. Sean O’Grady in the Independent yesterday had a neat paragraph explaining the links between demand for commodities such as oil and what is happening in the foreign exchange markets to the value of the US dollar.

“Commodities that are traded and denominated in dollars usually move for technical reasons in the opposite direction to the US currency. A falling greenback makes dollar-denominated commodities cheaper for holders of other currencies, though the scale of recent movements has few parallels. Gold is also a traditional hedge against inflation, especially in Asia’”

I like this explanation. Agressive interest rate cutting by the Fed is one factor behind the fresh surge in world crude oil prices. Dollar weakness is driving oil prices higher.