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Oil slip skids dollar, bond yields

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The dollar dropped to its lowest in almost a month on Monday as a bashing for oil prices on doubts about an OPEC output cut this week left investors reversing inflation trades that have taken hold of markets since the U.S. election.

Crude prices LCOc1 and Europe’s main stock markets <0#.INDEXE> were down over 1 per cent in early European trading as Italian shares also took a fresh tumble ahead of its referendum on constitutional change this Sunday.

Oil’s fall added to a 3.5 per cent plunge on Friday when it emerged that Saudi Arabia would not join talks with non-OPEC producers on potential supply cuts.

With oil so vital for global costs it was rapidly cooling bets on a near-term inflation jump and tempering expectations for rises in U.S. interest rates that have been running up fast in recent weeks.

The dollar sank as much as 1.6 per cent against the yen, going as low as 111.355 yen JPY= before recovering slightly to 112.00. That was still its biggest fall against its Japanese rival since October 7 and against a basket of top world currencies .DXY it was the greenback’s worst day since November.

Societe Generale strategist, Alvin Tan said, “It’s a bit of a pullback in the dollar”.

“The fall in oil is pushing back U.S. bond yields and that is leading the consolidation in the dollar.. There is more scepticism about an (OPEC) output cut now.”

Paul

The author Paul