Friday, September 7, 2007

One definite blow, one possible, to the dollar

First, Japanese oil company Nippon Oil will start buying oil from Iran in yen, not dollars. For Iran, this is an expansion of earlier moves to sell in currencies besides the dollar, in part for political reasons, and in part for the falling value of the dollar, which won’t be helped by this.

The eroding away of dollar-denominated oil has long been an American fear. So far, it’s just actions of an OPEC edge country like Iran. The big fear is that OPEC might officially decide to co-denominate oil in euros as well as dollars. (Up until 1971, OPEC co-denominated in both the dollar and the pound sterling; the British financial world crashed when OPEN jerked the rug out from beneath the pound.

The possible hit to the dollar? China may be dumping Treasury securities. Somebody’s dumping them, that’s for sure; it will take another month or two to figure out who.