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Thread: Kuwait dinar jumps as dollar slide tests Gulf pegs

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    GRG55's Avatar
    GRG55 is online now iTulip High Commissioner, Select Premium Member, Canada and Persian Gulf
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    May 2007

    Default Re: Kuwait dinar jumps as dollar slide tests Gulf pegs

    Quote Originally Posted by jk View Post
    this seems like a prelude to pricing oil in terms of baskets, not dollars. grg55, do you foresee russian oil priced in rubles, mid-eastern oil priced in their domestic currencies and the end of dollar pricing? how might the transition to "the commode" [as you christened it] unfold?
    Unless there is a much bigger US $ crisis than we have already, I seriously doubt the GCC OPEC members will stop using it for oil transactions. Certainly they can't use their own currencies as there's not enough in circulation and they aren't really easily exchangable by purchasers. They may give some of their Eurozone customers the option of paying in Euros, I suppose, but even that would seem low probability - for now.

    They will undoubtedly have to reset the pegs against the US $ as China has been doing. Perhaps they will peg against a basket like Kuwait. But the Kuwait basket is still overwhelmingly US$ composed (which I imagine is why the Kuwaiti dinar is under upward pressure, like all the others here).

    Watch what Saudi does. As with oil production and OPEC, how goes Saudi on currency is how goes the GCC. And remember, this group of small economies can't even agree on a common currency for their internal economic zone, so the chances of any agreement towards a pricing basket, or something like the commode are just about nil. However, if the US $ goes into freefall who knows what will happen here, or anywhere else in the world.

    As for Russia selling oil in rubles, I have never understood how that actually works, and I think its more for show and (Russian) national pride than anything practical. As far as I know the ruble is not a freely exchangable currency, so how does a European purchaser of Russian oil get its hands on enough rubles to buy the cargo? Has to be some sort of deal with the Russian central bank I would assume. Maybe C1ue can shed some light on this.
    Last edited by GRG55; 11-23-07 at 07:50 AM.



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