MercoPress. South Atlantic News Agency

US dollar plummets and soaring oil keeps breaking records

The US dollar tumbled to yet another new low against the Euro and oil prices rose to a record 92 US dollars per barrel on fears over supplies for the northern hemisphere winter months ahead.

The Euro on Friday hit $1.4394 by late trade in New York, breaking the record set last Friday, when one Euro bought $1.4319. The pound hit a three-month high against the dollar at 2.0574. A slew of weak data including a drop-off in durable goods sales and plummeting demand for new homes has underlined woes in the US economy. Faced with this scenario the prevailing opinion is that the Federal Reserve will again cut rates when it meets next week after having last month reduced interest rates from 5.25% to 4.75% in a bid to rejuvenate the economy. And many observers expect a further rate cut to at least 4.25% as policymakers try to lift the economy, which is showing increasing signs of suffering from a slump in house prices and higher credit costs. Meanwhile the week closed with the US light, sweet crude rising $1.74 to $92.22 a barrel before falling back to $91.86 by close of trade in New York and the London Brent also reached a high of $89.27 before later settling at $88.69, up $1.21 cents on the day. US crude oil stocks unexpectedly fell by 5.3 million barrels last week. Analysts said threats of US sanctions against Iran and tension on the Iraqi border had also helped the rally. According to some analysts, oil may well reach $100 a barrel. Earlier in the week, oil prices had retreated from previous highs following concerns about the health of the US economy and expectations of more output from oil producers' cartel Opec. But despite the latest price surge, Opec members said they would stick to their existing production targets and have expressed concern about the value of the US dollar. The group has already pledged to increase production by 500,000 barrels a day starting from 1 November, but the US is calling for an additional rise. Lower US rates could help the economy but will also further weaken the currency as they encourage investors to transfer funds to other currencies. And there is a risk of inflation becoming a greater problem if money is made cheaper to borrow, encouraging more consumer spending and takeover activities.