Oil's rise sparks concern among currency market participants

Posted On: March 02, 2011
Oil prices surged in February on the back of the Middle East's unrest; according to Oil & Gas Journal, West Texas Intermediate oil futures rose more than $6 per barrel and Brent crude futures jumped nearly $11 per barrel. Those sudden increases, Dow Jones Newswires reported recently, are fomenting concern among currency traders.

It's not just currency investors who are worried about the impact that pricier oil could have on the global economy, though. Stock, bond and commodity traders are also fretting about oil's recent gains; reflecting the growing sense of unease was the Chicago Board Options Exchange's Volatility Index, which rose last week to a three-month high.

Some in the market, Dow Jones said, remain optimistic about the economic recovery and believe growth would only slow if oil were to top $125 per barrel. But others think the energy market's recent swings presage further currency fluctuations.

"The downtrend in [foreign-exchange] volatility has run its course," Bank of America Merrill Lynch analyst MacNeil Curry told the news service.

The situation reflects how sensitive currencies are to political and macroeconomic developments - and suggests that companies may need to brace themselves for continued volatility in the currency market.

Category: Industry News

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