The dollar fell to a 15-year low against the yen and continued its slide against the euro Thursday, increasing the attractiveness of commodities, pushing oil prices up for a third day in a row.
Futures also edged higher as the dollar slumped against the yen and to the lowest levels in eight months against the euro. This was also fueled by speculation the Federal Reserve is going to increase credit easing in order to protect the US economic recovery. Supplies of motor fuel have also slipped below expected numbers.
Hannes Loacker, an analyst with Vienna’s Raiffeisen Zentralbank Oesterreich AG commented that in the last few weeks the dollar has weakened significantly, “That’s what we saw throughout 2009, which made oil rise from below $40 to $70. This correlation disappeared all year until now, so all commodities are rising.”
On the New York Mercantile Exchange oil prices for November delivery have risen 0.9 percent, or 72 cents to $83.95 a barrel, while brent crude also rose 0.5 percent, gaining 42 cents to reach $85.52 a barrel on London’s ICE Futures Europe exchange.
With the dollar weakened, the investment appeal of commodities is heightened for investors, however some are surprised at the rise given that US demand is weakened due to job cuts and unemployment figures worsening. “For crude to really move higher there has to be more demand strength from the U.S. It’s not enough to move oil to $100,” Loacker commented.
