MoneyNews.com
OPEC Abandons U.S. Dollar
Sun Dec 17, 2006 16:35
 
 

OPEC Abandons U.S. Dollar Source: MoneyNews.com


OPEC Abandons U.S. Dollar

Oil-producing countries have reduced their dollar holdings to the lowest
level in two years and shifted oil income into other currencies, according
to the Bank for International Settlements.

Members of the Organization of Petroleum Exporting Countries and Russia
reduced their dollar holdings from 67 percent in the first quarter to 65
percent in the second quarter.

At the same time, they increased their holdings of euros from 20 percent to
22 percent, the BIS said. They also boosted holdings of the yen and British
pound.

Eighteen months ago, the oil-producing countries’ exposure to the dollar was
above 70 percent.

"The revelation in the latest BIS quarterly review . . . confirms market
speculation about a move out of dollars and could put new pressure on the
ailing U.S. currency," the Financial Times reports.

The BIS, the central bank for the developed world’s central banks, disclosed
that OPEC’s dollar deposits fell by $5.3 billion, while euro and
yen-denominated deposits rose $2.8 billion and $3.8 billion, respectively.

The last time oil-exporting countries reduced their exposure to the dollar —
in late 2003 — it pushed the euro to an all-time high against the dollar.

The BIS noted: "While the data are not comprehensive, they do appear to
indicate a modest shift over the quarter in the U.S. dollar share of
reporting banks’ liabilities to oil exporting countries."

According to the Times, "the dollar has suffered weakness because of
concerns about global imbalances and the future course of the Federal
Reserve’s interest rate policy."

Editor's Note:
* Warren Buffett is betting billions the dollar will crash in 2007.
<http://news.newsmax.com/?kWXajqE7yuvBEwWeuzUMhePZz3k&http://www.newsmax.com
/sector/jm_0206a.cfm?MN=1&promo_code=2B16-1&s=al>

2. Greenspan: More Dollar Weakness Ahead

The U.S. dollar will stay weak for the next few years, according to former
Federal Reserve Chairman Alan Greenspan. Greenspan blames the U.S. balance
of payments deficit for the prolonged frailty of the dollar.

“I expect that the dollar will continue to drift downwards until there will
be a change in the U.S. balance of payments,” remarked Greenspan, who spoke
via video-link to a business conference in Tel Aviv.

“There has been some evidence that Organization of Petroleum Exporting
Countries nations are beginning to switch their reserves out of dollars and
into euro and yen,” continued Greenspan.

MoneyNews told readers yesterday that the Bank for International
Settlements, which is known as the “central banks’ central bank,” reported a
decline in U.S. dollar reserves in OPEC countries as well as oil exporter
Russia.

“It is imprudent to hold everything in one currency,” advised Greenspan, who
sounded like he was talking down the dollar. In fact, Greenspan added that
at some point the dollar would decline in value.

"That [a falling dollar] will be the experience of the next few years,"
Greenspan said.

Editor's Note:
* Can Ben Bernanke avoid the coming currency crisis?
http://news.newsmax.com/?kWXajTJ7y4QZRVpf2qJgAGU163k&http://www.newsmax.com

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