Jitters undermine dollar

["Mark Jones" <markjones011@xxxxxxxxxxxxx>]

Oil price hits two-year high as war fears unsettle markets

Mark Milner
Saturday December 28, 2002
The Guardian

The dollar fell to its lowest for almost three years yesterday, undermined
by worries about the US economy, the rising oil price and increasing
tensions over Iraq and North Korea.
Against the euro the dollar slipped to its weakest since January 2000 while
on the oil market North Sea benchmark Brent topped $30 (£20) a barrel and US
crude hit $32.73 - its highest for two years.

The pound fell to just under 65p against the euro - its worst since the
summer - but topped $1.60, its best against the greenback for 2 years.

The oil price is being driven by a general strike against president Hugo
Chavez in Venezuela which has cut the country's output to little more than a
trickle. Analysts are warning that the reduction in Venezuelan supplies
could have an impact on petrol prices.

"If the strike continues and stocks don't build we could see a massive spike
in gasoline prices. This would definitely impact motorists as well. We could
see rises of 3p to 4p a litre by the second quarter of next year," according
to Orrin Middleton at Barclays Capital.

BP said it had no immediate plans to raise prices but ac knowledged it was
seeing inflationary pressures at the pumps and that it was monitoring the
situation. Shell said it had no plans to make any "pro-active move" but was
ready to follow any increases by its main rivals.

Saudi Arabia, the leading Opec producer, has said it will not allow
shortages to develop, despite the recent move by the oil producing cartel to
tighten production quotas. So far Opec officials insist there are no signs
of any real shortages.

On the foreign exchanges the dollar fell to $1.0397 against the euro while
the Swiss franc stood at 1.3987 to the greenback - its best for four years.

Analysts cited the war of words between the US and North Korea over the
latter's nuclear programme and concerns about the possibility of military
action against Iraq as factors weighing on the dollar.

"The dollar is under pressure. Any good news provides only a very short term
boost but any bad news sparks a sell-off straight away," according to Nick
Parsons, currency economist at Commerzbank in London. "At the moment
whichever way you look there are difficulties and uncertainties facing the
dollar."

The latest figures for Christmas retail sales in the US proved the point.
"The reports from the (US) retailers about Christmas have been fairly
dismal. People are coming to the view that any recovery will be a jobless
recovery which is not good for consumer confidence," said one London
analyst.

The gloom spread over to equity markets in both Europe and the US yesterday.
In London the FTSE 100 share index ended down 112 points at 3829 while in
New York the Dow Jones industrial average was 77 points lower at 8355 in
lunchtime trading. The market ignored US housing figures which showed sales
of new homes had risen 5.7% in November, defying expectations that the boom
may be running out of steam.

Other economic data did little to cheer spirits. French business confidence
showed greater than expected resilience last month, according to figures
from the national statistics office. The underlying trend remains muted.

In Italy the consumer watchdog Codacons labelled the Christmas shopping
season a "flop" for retailers. Purchases fell 20% in Italy over Christmas
2002 compared to last year.


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