In the most profound financial change in recent Middle East history, Gulf Arabs are planning - along with China, Russia, Japan and France - to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar. Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.
In the most profound financial change in recent Middle East history, Gulf Arabs are planning - along with China, Russia, Japan and France - to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.
Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.
As China has a load of useless dollars cluttering up their vaults, surely they'd want to dump them on oil producing states and reduce their own risk. keep to the Fen Causeway
The much more difficult task would be to replace the currency in which oil is priced: the U.S. dollar, the currency that underpins benchmarks from New York to Dubai to Singapore, and which would require a massive effort to change. In other words, if the plan materializes, it could be major news for forex markets by allowing oil exporters to more easily diversify their currency reserves and remove the need for importing nations to buy dollars to pay for their oil, but would appear unlikely to revolutionize oil trade....Although an increasing share of global commodity trade is being settled between counterparties in non-dollar currencies, that's a far cry from changing the dollar-denominated markets that establish the underlying prices for those trades, even within the nine-year time frame that the paper cited....The fact that China's yuan and many Gulf currencies are not fully convertible is also a significant obstacle to any effort to replace the dollar in global commodity pricing.
In other words, if the plan materializes, it could be major news for forex markets by allowing oil exporters to more easily diversify their currency reserves and remove the need for importing nations to buy dollars to pay for their oil, but would appear unlikely to revolutionize oil trade....Although an increasing share of global commodity trade is being settled between counterparties in non-dollar currencies, that's a far cry from changing the dollar-denominated markets that establish the underlying prices for those trades, even within the nine-year time frame that the paper cited....The fact that China's yuan and many Gulf currencies are not fully convertible is also a significant obstacle to any effort to replace the dollar in global commodity pricing.
Gold hit a new 18-month high of $1,025.10 an ounce in Europe on Tuesday as the dollar slipped against a basket of currencies, boosting interest in the metal as an alternative asset.The dollar fell after a media report, later denied, that Gulf Arab states were in talks to abandon the dollar in oil trade in favor of a currency basket.A small seasonal increase in demand for physical gold is also supporting prices, traders said.
Gold hit a new 18-month high of $1,025.10 an ounce in Europe on Tuesday as the dollar slipped against a basket of currencies, boosting interest in the metal as an alternative asset.
The dollar fell after a media report, later denied, that Gulf Arab states were in talks to abandon the dollar in oil trade in favor of a currency basket.
A small seasonal increase in demand for physical gold is also supporting prices, traders said.
As we reported earlier, The Independent appears to have rocked the world on Tuesday with its Robert Fisk exclusive exposing a secret plot by international central banks to topple the US dollar. As we've stressed, denials have been coming out thick and fast from all the central banks involved. What's more, the concept of pricing oil in an alternative currency to the dollar is hardly a new one. Nevertheless, over the last 24 hours the dollar index was significantly underperforming its basket: So what to make of it all? Here's some of the market commentary doing the rounds on the matter on Tuesday morning (our emphasis throughout).
As we've stressed, denials have been coming out thick and fast from all the central banks involved. What's more, the concept of pricing oil in an alternative currency to the dollar is hardly a new one.
Nevertheless, over the last 24 hours the dollar index was significantly underperforming its basket:
So what to make of it all?
Here's some of the market commentary doing the rounds on the matter on Tuesday morning (our emphasis throughout).
The greenback fell further after the G-7 would not come to the rescue. The Group of Seven will let the dollar fall. The heated climate before the Istanbul meeting led some to expect global policymakers to take a stand, but despite the strong tone, Andrew Wilkinson, senior market analyst at Interactive Brokers, said it was short on action. "It invites investors to test the dollar's lines of resistance in order to see what response, if any, might be forthcoming in the event of a further fall in the value of the dollar," Wilkinson said.
The Group of Seven will let the dollar fall.
The heated climate before the Istanbul meeting led some to expect global policymakers to take a stand, but despite the strong tone, Andrew Wilkinson, senior market analyst at Interactive Brokers, said it was short on action. "It invites investors to test the dollar's lines of resistance in order to see what response, if any, might be forthcoming in the event of a further fall in the value of the dollar," Wilkinson said.
Is this a switch to a panic campaign?
