Forex Blog: Currency Trading News & Analysis.

December 6th 2005

OPEC nations shift forex reserves into USD

Many economists and currency traders have suspected that the nations of OPEC (as well as other net oil exporters) were reinvesting the proceeds of rising oil sales into dollar-denominated assets. This theory was recently borne out by a release of official OPEC statistics, which indicate that OPEC nations have collectively shifted their forex holdings into USD. Specifically, 69% of OPEC forex reserves are now held in USD, which represents an 8% increase from last year. Many experts believe OPEC to be extremely sensitive to changes in interest rates. Accordingly, as the US Federal Reserve has repeatedly raised interest rates, OPEC nations have moved capital into the US in order to earn higher returns. The Financial Times reports:

If interest rate differentials are key to Opec behaviour, the start of the eurozone tightening cycle could end the dollar’s newfound popularity.

Read More: Dollar’s rise aided by Opec holdings

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Posted by Adam Kritzer | in Central Banks, US Dollar | No Comments »

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