"Oil producers in the Gulf not only price their one commodity (oil) in dollars, but their currencies for the most part are dollar-pegged and, largely as a result, their foreign exchange reserves are massively overweight dollars. In a high oil price environment, the more the
Moving some portion of oil revenues out of dollar-based investments and into other countries is a logical move at this point for oil exporters. However, the types of investments that are made with these funds is a key variable. Just putting the money into sovereign debt wouldn't be that productive. Finding projects in emerging markets that can generate decent rates of return is the core issue...
Update: Well, I have to back up and say that if the US yield curve returns to a meaningful upward slope as it might be on its way towards based on today's market activity, all of the above becomes somewhat less relevant. If long-dated Treasury yields jump up quite a bit, that will goose the value of the dollar upward as well, obviously. Then the oil producers' problem is solved. Recent Treasury auctions have been weak anyway...
No comments:
Post a Comment