Dollar not entirely behind oil rise: Fed official
WASHINGTON (Reuters) - The dollar's decline has put upward pressure on oil prices but does not entirely explain the big rise in global prices, a U.S. Federal Reserve official said on Monday, suggesting there was more at play.
Steve Kamin, an associate director in the international finance division of the Fed, told an oil conference of the World Bank that for every 1 percent fall in the dollar, oil prices would rise by about 1 percent, a standard benchmark used by most economists.
"The fact of the matter is that when the dollar falls it does technically put upwards pressure on oil," Kamin said, "The questions is how much? The short answer is not enough, most likely, to explain the big run-up in oil prices that we have seen."
His comments came as oil sped to a record high above $107 a barrel on Monday, reversing earlier losses as investors sought out oil as a hedge against a depressed dollar and inflation.
Fears of a U.S. recession, following the biggest US job losses in five years and strains in the credit market, have depressed equities and the dollar while prompting many investors to seek safety in commodities, including oil.
The International Monetary Fund said last week that it was unclear whether it was the dollar's decline, speculative buying or rising demand that was fueling record oil prices.
Kamin said the run-up in oil prices in the last decade has had some impacts on the global economy, including higher inflation, and contributed to a global savings and large investments by sovereign wealth funds of oil-producing countries.
Jeffrey Currie, chief strategist and managing director for global investment at Goldman Sachs, said he expected oil prices to trade downwards to $90 barrel-range "sometime in the second quarter" and then move well back above $105 bpd for the rest of the year.
He said if growth rates accelerate in industrialized countries in 2009, supply constraints could weigh on the market.
(Reporting by Lesley Wroughton; Editing by Kenneth Barry)
