<http://today.reuters.com/news/articlebusiness.aspx?type=ousiv&storyID=2006-12-18T164825Z_01_N18477943_RTRIDST_0_BUSINESSPRO-USA-ECONOMY-CURRENTACCOUNT-DC.XML&from=business> Current account gap hits record Mon Dec 18, 2006 11:48 AM ET By Doug Palmer
WASHINGTON (Reuters) - The U.S. current account deficit widened in the third quarter to a record $225.6 billion, as surging oil prices and strong demand for Chinese and other foreign goods pushed imports higher, a U.S. Commerce Department report showed on Monday.
The quarterly shortfall surpassed the previous record of $223.1 billion in the fourth quarter of 2005, but was largely in line with expectations before the report.
More than half of the quarterly increase came from higher oil prices. Strong worldwide demand and tensions in the Middle East propelled average U.S. oil import prices to a record $66.12 per barrel in August, before they began to slide.
<http://www.marketwatch.com/news/story/dollar-flat-after-current-account/story.aspx?guid=%7B8AA8A8BE-1710-4716-8D93-29096264EBBA%7D> Dollar flat after current account, housing Currency market awaits wholesale inflation due Tuesday Related Blog Posts & Articles By Wanfeng Zhou, MarketWatch Last Update: 1:52 PM ET Dec 18, 2006
NEW YORK (MarketWatch) -- The dollar traded little changed against the euro and yen Monday, reversing early gains after a report showed U.S. home builders were a bit more pessimistic about the housing market in December. The National Association of Home Builders said Monday that its seasonally adjusted housing market index fell to 32 in December from 33 in November. Economists polled by MarketWatch had expected the index to improve to 34. However, home builders are growing more hopeful that home sales could perk up in six months, the report showed. See full story.
<http://www.bloomberg.com/apps/news?pid=20601109&sid=affCa25VtRhU&refer=home> Venezuela, Oil Producers Buy Euro as Dollar, Oil Fall (Update1) By Agnes Lovasz and Daniel Kruger
Dec. 18 (Bloomberg) -- Venezuelan leader Hugo Chavez is directing a growing share of the country's oil profits into euros as the dollar and crude prices fall.
The dollar, down 9.5 percent against the euro this year, may face more pressure in 2007 because Venezuela and oil producers from the United Arab Emirates to Indonesia plan to funnel more money into the single European currency.
``The U.S. dollar has suffered a long process of deterioration,'' Domingo Maza Zavala, one of seven board members at the central bank of Venezuela, said in a Dec. 14 interview. ``The diversification strategy started this year.''
Banco Central de Venezuela has slashed the percentage of its $35.9 billion worth of reserves invested in dollars and gold to 80 percent from 95 percent a year ago, said Maza Zavala. The country, the world's fifth-largest oil supplier, has boosted its euro holdings to 15 percent, from less than 5 percent in the same period.
The dollar has slumped against the European currency in 2006 as growth in the euro region outpaced the U.S. for the first time in five years. The dollar today fell against the euro to $1.3094 as of 6:55 a.m. in New York. The U.S. currency is little changed versus the yen this year, and currently trading at 117.81 yen.
Indonesia Buys Euros
Bank Indonesia is boosting euro holdings, said Senior Deputy Governor Miranda S Goeltom in a Dec. 13 interview in Jakarta. Indonesia has $39.9 billion in reserves. Sultan Bin Nasser al- Suwaidi, the governor of the Central Bank of the UAE, last month said he was considering when to shift as much as 8 percent of the nation's $24.9 billion in reserves into euros.
The central banks are changing policy ``because the oil price has come down a long way and the U.S. dollar has been declining,'' said Michael Derks, chief markets strategist at Arch Financial Products LLP, a London-based hedge fund. ``The euro stands to benefit.''
The Organization of Petroleum Exporting Countries, which produces 40 percent of the world's crude oil, said at a Dec. 14 meeting in Abuja, Nigeria, that it would cut output by 500,000 barrels a day to boost prices. Crude oil for January delivery fell 36 cents, or 0.6 percent, to $63.07 a barrel in after-hours electronic trading on the New York Mercantile Exchange. Prices have fallen from a high of $78.40 in mid-July.
Crude is priced in dollars and the U.S. is the biggest consumer, importing around $400 million worth of the fuel a day in 2005, according to data from BP Plc, Europe's second-biggest oil company.
Political Opposition
The share of foreign-exchange deposits held in dollars by OPEC members and Russia, the largest non-OPEC oil exporter, fell to a two-year low of 65 percent during the second quarter, from 67 percent during the previous three months, Bank for International Settlements figures released last week show.
Venezuela may also be motivated by animosity toward the U.S., said Rick Arney, chief currency strategist in San Francisco at Barclays Global Investors, which manages $1.7 trillion in assets.
``There is a political overlay to all of this,'' said Arney. ``Buying the dollar is not politically popular for some of these folks.''
Chavez, re-elected as President for six years on Dec. 3, told the UN General Assembly on Sept. 20 that the U.S. is ``the greatest threat'' to the planet, and has repeatedly described U.S. President George W. Bush as ``the devil.'' He also says Bush's administration is trying to have him killed.
Greenspan Comments
Chavez called on OPEC to sell oil denominated in euros rather than dollars at a meeting of the group in Caracas on June 1, supporting a proposal made by Iran.
Some analysts said the shift by oil-producing nations into euros is unlikely to weaken the dollar. OPEC nations reduced their dollar deposits by $5.3 billion in the second quarter, compared with holdings of $632 billion overall, according to data compiled by the BIS.
``It seems to be inconsequential in the large scheme of things,'' said Marc Chandler, global head of foreign-exchange strategy at Brown Brothers Harriman & Co. in New York. ``If anything, we should be surprised how small the outflow is.''
The euro climbed as much as 0.5 percent on Dec. 11, the most in a more than a week, when former Federal Reserve Chairman Alan Greenspan said there are signs OPEC nations are switching their reserves out of dollars.
`At the Start'
``A rising euro is a source of capital gain for central banks and a source for offsetting the capital loss created by the dollar'' decline, said Bankim Chadha, Deutsche Bank AG's head of macro foreign-exchange in New York and a former International Monetary Fund official. This gives ``an incentive to buy euros.''
OPEC members and Russia increased the percentage of their foreign-exchange deposits held in euros to 22 percent in the second quarter from 20 percent, the BIS said. By contrast, the global average is about a third, according to the Basel, Switzerland-based bank.
Oil states will probably buy the European currency at a faster rate to bring their reserves closer in line with other nations, according to David Durrant at Julius Baer Investment Management in New York.
``They've done very little diversification in the past,'' said Durrant, an investment strategist at Julius Baer, which oversees about $40 billion. ``We're at the start.''
To contact the reporters on this story: Agnes Lovasz in London at alovasz at bloomberg.net ; Daniel Kruger in New York at dkruger1 at bloomberg.net . Last Updated: December 18, 2006 06:59 EST
<http://news.bbc.co.uk/2/hi/business/6190865.stm> Dollar dropped in Iran asset move Iran is to shift its foreign currency reserves from dollars to euros and use the euro for oil deals in response to US-led pressure on its economy.
In a widely expected move, Tehran said it would use the euro for all future commercial transactions overseas.
The US, which accuses Tehran of supporting terrorism and trying to obtain nuclear weapons, has sought to limit the flow of dollars into Iran.
It wants the United Nations Security Council to impose sanctions on Iran.
Dollar squeeze
Analysts said Tehran had been steadily shifting its foreign-held assets out of dollars since 2003 and that Monday's announcement was unlikely to affect the value of the dollar, which has weakened significantly in recent months.
There will be no reliance on dollars Gholam-Hussein Elham, Iranian spokesman
An Iranian spokesman said all its foreign exchange transactions would be conducted in euros and its national budget would also be calculated in euros as well as its own currency.
"There will be no reliance on dollars," said Gholam-Hussein Elham.
"This change is already being made in the currency reserves abroad."
The currency move will apply to oil sales although it is expected that Iran, the world's fourth largest oil producer, will still accept oil payments in dollars.
Nuclear trigger
Washington has sought to exert financial pressure on Iran, which it accuses of flouting international law by trying to acquire nuclear weapons.
Tehran denies this, saying its nuclear research is for purely geared towards civilian uses.
Most international banks have stopped dollar transactions with Iran and some firms have ceased trading with Iran altogether in anticipation of possible future sanctions.
The dollar slipped slightly against the euro in New York trading although analysts said they did not expect the reaction to be too severe.
"It is something they have been saying they are going to do for quite a long time now, so I wouldn't expect any market reaction," said Ian Stannard, an economist with BNP Paribas.
The BBC's Tehran correspondent Frances Harrison said Iranian businessmen were complaining about delays in securing letters of credit and saw current conditions as a prelude to the imposition of sanctions.
Tehran has urged Iranian businesses to open letters of credit in euros in the future.
-- Yoshie <http://montages.blogspot.com/> <http://mrzine.org> <http://monthlyreview.org/>