US oil surges past $70 a barrel, dollar hits fresh high
NEW YORK: The dollar rose to fresh 2018 highs on Monday while oil prices surged to their highest since late 2014, driven by declining Venezuelan crude production and worries the Unites States could re-impose sanctions on Iran.
The crude surge lifted energy stocks in Europe and on Wall Street, with European shares supported by strong results and gains in Nestle after the Swiss company agreed to pay $7.15 billion to Starbucks in a global coffee alliance.
The euro broke below $1.19 for the first time this year on weaker-than-expected German industrial orders and declining eurozone investor sentiment.
Investors increased bets that rising US interest rates would continue to boost the dollar, while traders unwound their bearish positions on the greenback.
An index that tracks the dollar against a basket of leading currencies climbed to 92.974, its highest since December. The index was last up 0.18pc at 92.729.
“The general view right now is that the dollar is probably going to continue to move a bit higher against the euro in particular, maybe against the yen as well,” said Larry Hatheway, chief economist at GAM Investment Solutions.
The euro could slip to 117.50 or even 115 as a support level, Hatheway said, as the Federal Reserve tightens monetary policy and the European economy trends weaker, he said.
“There’s a general appreciation the Fed is going to move at least twice again this year and the consensus is shifting toward three more moves this year.”
The euro slid 0.27pc to $1.1926, while the Japanese yen was little changed at 109.09 per dollar.
Venezuelan oil exports came under threat after US oil major ConocoPhillips moved to take Caribbean assets of state-run PDVSA to enforce a $2 billion arbitration award, three sources told Reuters.
The move could further crimp PDVSA’s declining oil output and exports.
Widespread expectations that US President Donald Trump will withdraw from the Iranian nuclear pact also weighed on crude prices.
US crude rose 73 cents to $70.45 a barrel, while Brent gained $1.22 to $76.09.
Published in Dawn, May 8th, 2018