August is called the month of Oil Price fluctuation

Thursday, August 28, 2008

I believe that market focus for the near future will be on the sterling and oil prices – two key elements in keeping the dollar stable. Oil prices fell the steepest fall in 4 years on last Friday to below $115, thus increasing the dollar's gains. The rise in oil prices is the U.S.-Russia conflict, as Russia is the second largest oil producer in the world. Canada is also one of the world's largest oil producers, providing the U.S. with the largest supply of oil.

Very recently the rise in gold and oil prices has brought the dollar's rally to a halt. On the other hand, the rise of oil to above $116 a barrel was not as helpful to the euro and the sterling as expected, reflecting the bearish sentiment towards these currencies.

On 13th August 2008, the Oil prices were down yet again by 1.3 % to $113.17 a barrel – a total $30 drop since July's record. The steep fall from $147 to below $115, was due to its status of a major exporter of oil.

On the contrary on 11h august, this price eventually settled at $116.50 a barrel. I believe on that day that the rise of the euro had hit a wall, and its fall is not only contributed to the pressures from soaring oil prices. The euro has lost momentum, affected by dollar buying as well as the tight monetary policy, making investors believe that a European cut in interest rates will occur sooner than later.

Thus august month has seen major changes in the prices of oil and its impact on world currencies.


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