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U.S. dollar starts the big slide against major currencies

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  • May 1, 2008 -- The US central bank cut interest rates last night for the seventh time since last summer as it sought to combat the impact of a collapsing housing market and the credit crunch on the world's biggest economy.

    The Federal Reserve's open market committee voted unanimously for a quarter-point cut in its key fed funds rate to 2% - its lowest level since late 2004.

    "Recent information indicates that economic activity remains weak", the Fed said in a statement. "Household and business spending has been subdued and labour markets have softened further. Financial markets remain under considerable stress, and tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters."

    The central bank has now cut US interest rates by 3.25 percentage points since the world's financial system was thrown into turmoil by the sub-prime mortgage crisis last year, but figures out yesterday showed that the American economy came to a virtual standstill in the first three months of this year. Figures for GDP in the first quarter showed the US growing at an annual rate of just 0.6%.

    Wall Street believes that the Fed may now adopt a "wait-and-see" approach before deciding what to do next on rates given the recent increase in inflationary pressure caused by a weak dollar and rising global commodity prices.

    In its statement, the Fed stressed the need for caution, noting that "uncertainty about the inflation outlook remains high. It will be necessary to continue to monitor inflation developments carefully."

    The Fed added that it expected lower interest rates, combined with the bail-out for Wall Street banks, to drag the economy away from recession.

    "The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time and to mitigate risks to economic activity. The committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability," it said.

    Wall Street had been expecting the quarter-point cut in rates, and the belief that the Fed had left the door ajar for further reductions in borrowing costs helped extend gains on the stock market after the decision was announced. The Dow Jones industrial average was up 140 points shortly after the announcement.

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                  • Originally posted by Al-khiyal View Post

                    May 8, 2008 -- OPEC President Chakib Khelil sneaked through Washington this week and created nary a ripple, even as Congress and Sen. Hillary Clinton are threatening myriad attacks on the group and blaming it for $120-a-barrel oil. But in an interview just before flying back to Algeria, Khelil did let off a few barbs.

                    The criticisms of OPEC, said the Algerian energy minister, are baseless. “They are barking up the wrong tree,” he said of lawmakers who are targeting the oil-exporting group. “If they want to improve matters, they should be worrying about how to manage the U.S. economy and the subprime crisis so that there’s more credit in the market and the dollar improves.”

                    Congress in recent weeks has threatened to revive legislation that would open the way for anti-trust lawsuits against the Organization of Petroleum Exporting Countries and its 13 members, which together provide 40% of daily world oil supplies. Clinton has been even more pointed, saying that the U.S. should go after the group’s members within the World Trade Organization. “We’re going to begin to hold them accountable,” she told Fox News earlier this month.

                    Khelil, who was in town for a session of the U.S.-Arab Economic Forum, laughed off the saber rattling as largely irrelevant. “Blaming OPEC isn’t going to bring prices down,” he said. His argument, along with many others in OPEC, is that the problem is mainly dollar driven. So long as the dollar keeps slumping, oil will keep going up – maybe as high as $200 a barrel “if the dollar actually falls that far.”

                    For the upteenth time this year, Khelil said that “market is well supplied,” a mantra that was also repeated Thursday by OPEC Secretary General Abdullah al-Badri. OPEC is so insistent that the soaring price of oil has nothing to do with supply and demand that even if the price continues to soar all summer, Khelil said, the group doesn’t plan to convene again until early September.

                    Still, Khelil didn’t begrudge the candidates and lawmakers for poking at OPEC. “That’s politics. That’s campaigning,” he said. “Candidates have to please their electorate, and voters like to think that their candidates can do something about oil prices.”

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                    • It's going to get even worse:

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                        • Originally posted by Al-khiyal View Post

                          Samedi 10 Mai 2008 -- Le cours du pétrole a dépassé hier, pour la première fois, le seuil des 126 dollars à New York, quelques heures après avoir franchi celui de 125 dollars, poursuivant une course folle, nourrie par les craintes sur l’offre, la robustesse de la demande et la spéculation. Vers 13h15 GMT, le baril de pétrole a dépassé 126 dollars à New York, montant jusqu’à un nouveau record absolu de 126,20 dollars, tandis qu’à Londres, il a culminé à 125,90 dollars. Dans la matinée, les cours avaient dépassé pour la première fois de leur histoire le nouveau seuil symbolique de 125 dollars, d’abord à New York, puis à Londres. Ces chiffres sont les derniers d’une pluie de records cette semaine. Des sabotages sur les installations nigérianes du groupe pétrolier Shell et un regain de tensions géopolitiques entre l’Occident et l’Iran, deuxième producteur au sein de l’Organisation des pays exportateurs de pétrole (Opep) avaient servi d’amorce vendredi dernier à cette flambée. “Bien que la demande américaine et des autres pays développés s’affaiblissent, la robuste demande des pays en développement (Chine et Inde en tête, ndlr) et, surtout, l’offre entravée contribuent à propulser les prix du WTI (West Texas Intermediate, le brut coté à New York, ndlr) et du Brent à des records”, ont résumé les analystes de Morgan Stanley. Et ce, malgré un regain de vigueur du dollar cette semaine et une augmentation surprise des réserves américaines cette semaine. En toile de fond, les prix profitent également de la réticence de l’Organisation des pays producteurs de pétrole (Opep) à augmenter sa production, et de la baisse du dollar, qui a incité les spéculateurs à acheter des matières premières pour se couvrir contre l’inflation. Le rôle des spéculateurs dans cette dernière flambée a été par ailleurs souligné par de nombreux experts.

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                              Dude (or Dudette), don't just read about it - DO something about it

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                              • June 7, 2008 -- The price of oil has made a record jump to nearly $139 a barrel, amid reports it could reach $150 by July because of rising demand and political tension.

                                Crude in New York gained more than $10 - its biggest-ever one-day rise.

                                The spike in oil prices coincided with a dollar slump, plummeting share prices on Wall Street and US unemployment suffering its biggest rise in 20 years.

                                It also comes as energy officials from the world's biggest consuming nations meet in Japan to discuss fuel prices.

                                Officials and ministers from the Group of Eight key industrialised nations (G8), as well as China, India and South Korea, are meeting for two days in the northern city of Aomori, to plot a strategy to deal with volatility in oil, gas and coal markets.

                                On Friday light crude set a high of $139.12 in after-hours trading on the New York Mercantile Exchange after hitting $138.54 at the regular session.

                                Crude oil hit a record high of $135 a barrel last month.

                                The BBC's North America Editor, Justin Webb, says the gloomy figures are a reminder to all Americans that the nation faces serious economic problems and perhaps even a recession.

                                Oil prices were given a boost on a report by Morgan Stanley analyst Ole Slorer, who suggested the price of oil could rocket to $150 as early as July.

                                Some analysts have suggested that prices would reach as high as $200 a barrel during the next 18 months.

                                The price of the benchmark light, sweet crude oil has already seen rapid gains over the past months and has gained more than 40% over the year.

                                The market was also responding to a statement by Israel's transport minister that an attack on Iran was "unavoidable" after sanctions to prevent Tehran from developing its nuclear capability had failed.

                                Investors hedging oil against the weak dollar has also pushed up the price of oil.

                                Fears that workers at Chevron Corporation in Nigeria may go on strike and subsequently disrupt production and access to oil are also adding to market jitters.

                                Oil prices had recorded losses earlier this weak after doubts about future demand took hold of the market.

                                Both the Indian and Malaysian governments have raised fuel prices in order to cut the subsidies they provide.

                                The International Energy Agency (IEA), an adviser to 27 industrialised countries, had said it could lower its 2008 demand growth projection further, after having already more than halved it to 1.03 million barrels per day.

                                But several analysts have proven bullish about future prospects.

                                Harry Tchilinguirian, oil analyst at BNP Paribas in London, said demand would be sustained by expanding Asian nations.

                                "World oil demand growth is still accounted mostly by China, the Middle East and Latin America - and through the summer, there is no reason to expect a material slowdown in demand growth in these areas," he said.

                                Correspondents say oil prices were also pushed up by Israeli threats to strike on Iran over its nuclear programme.

                                Despite widespread international concern over Iran's nuclear programme, Tehran insists it is developing its technology only for civilian purposes.

                                Israeli transport minister Shaul Mofaz told the Yediot Aharonot newspaper an attack on Iran's nuclear facilities seemed inevitable.

                                "If Iran continues its nuclear weapons program, we will attack it," he told the daily.

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