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US Dollar Falls, Raw Material Prices Rise

Posted May. 14, 2009 08:11,   


The U.S. dollar is losing its value on the global financial market while prices of raw materials are rising.

A weak dollar is common when the global economy stabilizes and the rise in raw material prices means China has begun increasing production, so speculation is rising that the global economy has bottomed out.

Korea’s economy will suffer, however, since the falling value of the dollar and rising raw material prices will negatively affect exports, according to experts.

The U.S. Dollar Index, which indicates the value of the greenback against the world’s top six currencies such as the euro, yen and British pound, dropped to 82 yesterday, the lowest level in four months. This indicates investors are withdrawing from the dollar in the belief that the global economy will soon recover.

Choi Ho, a senior researcher at KDB Research Institute in Seoul, said, “Given the huge U.S. trade deficit, the dollar will continue to be weak.”

Investors are selling the dollar and buying raw materials such as crude oil, gold and copper. The Reuters-Jefferies CRB index, which tracks commodity prices across 19 markets, rose 0.4 percent yesterday, the highest in five and a half months.

Crude oil prices are leading the rally in raw material prices. WTI crude price for June delivery rose as high as 60.08 dollars per barrel yesterday, the first time for the price to exceed 60 dollars since the U.S.-led financial crisis worsened dramatically in mid-November last year.

The 76-percent rise in oil prices from 34 dollars per barrel three months ago is blamed on speculative activities, according to experts. Given expected inflation to come on the heels of global recovery, speculative funds are pouring into oil.

Corn prices hit a four-month high and those of gold recorded a new six-month high. Natural gas prices also posted their highest levels in three months on expectations of rising demand.

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