Falling commodity prices, rising risk aversion, and now the threat of currency de-pegging by oil exporters, are all expected to take their toll. Neil Mellor, a senior currency strategist at Bank of New York in London, said the increased negative news flow has clearly refocused minds on the outlook for growth and away from inflation – "which we believe has been fueling the likes of the Australian, Canadian and New Zealand dollars. Last week, the final straw for commodity currencies appears to have come from signs that the subprime crisis may well drag on for some time yet and take more of a toll on global growth prospects than initially expected. Favorable terms of trade developments have shielded their external balances from any damage from currency strength, but the deficits remain large," noted Daragh Maher, a senior currency strategist with Calyon Credit Agricole in London. As oil exporting countries in the Gulf region have made clear in recent weeks that their currency pegs against the dollar are under severe pressure as the dollar’s decline creates inflationary costs and threatens their buoyant economies with a sharp downturn. Early Monday in Europe, the dollar was under pressure once again as Group of 20 finance ministers meeting in Cape Town over the weekend failed to make any specific concerns about its recent slide, and OPEC ministers meeting in Riyadh faced calls from Iran and Venezuela to consider pricing crude prices in currencies other than the dollar. read more
[Tags]currencies, currency, dollar, global, prices, commodity, forex news[/Tags]
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