Financial Times, Published: December 3 2007 02:00 | Last updated: December 3 2007 02:00
What would be the effect if commodities including oil were priced in a currency other than the dollar?
David Woo: The impact on the US dollar would be negative. The fact that the dollar is the main transactional currency for global trade means that the world has to maintain minimum dollar balances to facilitate international payments. If these dollar balances are no longer required, it will be clearly harmful for the dollar. That said, we think the risk that the pricing of Opec oil will soon move to a system based on a basket of currencies is low. For one thing, such a move will necessitate an overhaul of the existing pricing system, given that Opec crudes are currently priced in terms of dollar adjustments from dollar-denominated benchmarks. The absence of non-US dollar alternatives would therefore require moving away from current market mechanisms and setting up a brand new pricing system, which we do not think is feasible right now.
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