Oil prices rose to a new intraday high near $102 a barrel Wednesday as a slide in the U.S. dollar prompted investors to pump more money into energy futures as a hedge against inflation.
Along with the rise in the British pound, which is nearing US$2 again, the surging euro will not be kind to Americans visiting Europe — they’ll have to pay more for hotel rooms in , entrance fees at the Louvre and chocolates in Belgium.
On the other hand, the stronger Euro makes shopping trips to the more appealing to Europeans.
The Euro’s strength is not likely to weaken anytime soon, given that any “worsening in interest-rate differentials dilutes a key support for the dollar.”
Weaker growth prospects in the United States, coupled with its deficit will “exert a significant downward influence” in the long term and cause some countries to shift more of their reserves from dollars to other currencies, including the Euro.
But, at the same time, the European Central Bank, which has left its own rates unchanged since last summer, is expected to keep them at 4 percent when it meets next week.
Lower interest rates can jump-start a nation’s economy, but may weigh on its currency as traders transfer funds to countries where they can earn higher returns.
But traders in both the energy market and the stock market, which also advanced sharply, seemed largely unfaded. Oil has risen in recent days amid an increase in speculative buying, with some traders believing that global demand will be high enough to support higher crude prices even if the American economy is slowing.
“Crude has cracked through the $100-level again and that’s driven by financial investors moving money into commodities markets,”
Also supporting prices were concerns about supply disruptions from unrest in, a major oil exporter. Turkish ground forces pushed their offensive against Kurdish rebels deeper into the north of, seizing seven guerrilla camps.