The single currency made strong gains yesterday as the dollar came under pressure about its future status as the chief currency used in oil trades.
- The single currency broached two week highs as a report came through that Arab States were in secret discussion to find alternatives to using the dollar in oil trades.
- Major oil-producing countries have denied the report, but markets reacted strongly to the news, which has added fuel to arguments that the US currency’s global status is coming under pressure.
- Analysts noted that the dollar’s sharp fall was a good example of poor sentiment toward the US currency being vulnerable to speculative selling.
- Rallying equity markets encouraged further dollar selling, with risk appetite in the market diminishing the appeal of the haven currency.
- Risk was also high following the Reserve Bank of Australia’s relatively unexpected rate hike, which spurred demand for high-yielding assets, lending support to an upward movement in the euro/dollar price.