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March 14th 2006

OPEC threatens diversification

Last week, the United Arab Emirates (UAE) was pressured into withdrawing from a deal that would have given it control over several US ports. Later in the week, the UAE announced that it would convert 10% of its foreign exchange reserves from dollars to Euros. While the timing of the announcement is open to debate, its impact is clear. Several other oil exporters have announced similar intentions to diversify their reserves. Some analysts think the moves are largely political. Other analysts think these nations are simply responding to narrowing interest differentials between the US and the rest of the developed world. Either way, dollar bulls should beware. Reuters reports:

The prospect of Middle Eastern oil exporters shunning the dollar sent ripples through currency markets on Monday, but analysts said any shift looks set to be gradual, marginal and driven by economic considerations.

Read More: Markets may be jumping gun over Gulf dollar sales

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Posted by Adam Kritzer | in Politics & Policy, US Dollar | No Comments »

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