The Standard
Oil exporters' shift to euros behind dollar's fall: Soros
February 22, 2005
Moves by Middle East oil exporters and Russia to switch some revenue
from dollars to euros lie behind the United States currency's
weakness, and a further rise in crude prices could prompt more
declines, billionaire investor George Soros said Monday.
He told delegates to the Jeddah Economic Forum that the dollar's fall
should help to lower the US current account and trade deficits, but
warned that a fall beyond an undisclosed ``tipping point'' would
severely disrupt markets.
The US current account deficit is more than 5 percent of gross
domestic product despite the currency's three-year slide. The dollar,
however, has staged a comeback recently, gaining about 3.6 percent
against the euro and 3 percent versus the yen so far this year.
``The oil exporting countries' central banks ... have been switching
out of dollars mainly into euros and Russia also plays an important
role in this. That is, I think, at the bottom of the current weakness
of the dollar,'' Soros said.
Soros, dubbed ``The Man who broke the Bank of England'' for his role
as a hedge fund manager in betting the pound would drop in 1992, said
he is not predicting further falls in the value of the dollar. But he
linked its fate to the price of oil.
``The higher the price of oil the more the dollars there are to be
switched to euro [so] the strength of oil will reinforce the weakness
of the dollar,'' he said. ``That is only one factor, but I think
there is such a relationship.''
US crude hit a record US$55.67 (HK$434.22) a barrel late last year
and prices remain close to US$50 a barrel.
In comments on the sidelines of the forum, Soros said the US current
account deficit could be financed at the current level of the dollar.
``There are willing holders of the dollar. There are the Asian
countries that are happy to accumulate dollar balances in order to
have an export surplus and a market for their dollars,'' he said.
Soros would not make detailed comments on why long-term borrowing
costs have fallen in the face of short-term rate increases, a
development US Federal Reserve chairman Alan Greenspan said Wednesday
he found difficult to explain.
``A flattening of the yield curve is usually an indication of a
slowing economy, but here I don't know,'' Soros said. REUTERS
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