Oil Gushes Higher While The Dollar Drops Lower
Thursday, March 13, 2008SUSIE GHARIB: A record day for oil, gold and the U.S. dollar. In New York trading, oil closed over $110 a barrel for the first time, while gold soared above $1,000 an ounce, also a new milestone. Meanwhile, the U.S. dollar sank to a new low against the euro and also fell to its lowest level against the Japanese yen since 1995. Erika Miller looks at the outlook for the dollar and tells us why there are pros and cons to a weak greenback.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: We all know a dollar is worth 100 cents; now, it's also worth about 100 yen. That's the first time the greenback has fallen to that level against the Japanese currency in a dozen years. The U.S. dollar is also trading at all-time lows against the euro. Currency expert Rebecca Patterson says the dollar's decline has serious implications.
REBECCA PATTERSON, GLOBAL HEAD OF FOREIGN EXCHANGE, JPMORGAN PRIVATE BANK: What makes me nervous is that dollar weakness in recent days has started having a contagion effect to equity markets. So the weak dollar is actually starting to be the dog that wags the tail and the equity markets are the tail. So, to the degree the dollar pulls down stocks, it happens globally.
MILLER: Many experts predict the U.S. currency will continue to weaken near term, especially if the Fed cuts interest rates. If that happens, foreign exchange analyst Ashraf Laidi worries foreign central banks could move away from dollars as their primary reserve currency.
ASHRAF LAIDI, CHIEF FX ANALYST, CMC MARKETS US: In their forward looking purchases of currency reserves, they may actually be expected to temper their purchases of U.S. dollars, in favor of sterling, in favor of the euro and even in favor of gold.
MILLER: Last night on NIGHTLY BUSINESS REPORT, President Bush made his administration's position on the dollar clear.
GHARIB: Would you like a stronger dollar?
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I would, absolutely and there are certain things that we can do. We can send signals to the world that their capital is welcome into the United States.
MILLER: The big question is whether the U.S. will intervene in foreign exchange markets to prop up the dollar. Some experts say the U.S. currency's decline may soon become sharp enough to turn words into action.
PATTERSON: The question is, given the dollar's weakness today, the pace of that weakness, the contagion risk, do they take statement and change it and make it something stronger and I think we're getting to that point.
MILLER: Experts say intervention works best when it is a coordinated effort among the United States, Japan and European Union. Analysts say that topic could be discussed when the group of seven industrial nations meets in April. Erika Miller, NIGHTLY BUSINESS REPORT, New York.
