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UK Fund Manager: Commodities Moving Away from US Dollar

Via NY Transfer News Collective  *  All the News that Doesn't Fit
 
Reuters - October 12, 2007
http://www.reuters.com/article/reutersEdge/idUSL1227332920071012

Commodities will move out of pricing in dollars, fund manager says

By Pratima Desai

LONDON -- Resource-rich countries will move away from the dollar
as a base for the commodities they produce to protect their earnings
as the dollar's slide accelerates, UK-based Emergent Asset Management
told Reuters.

The debate about commodity denomination has heated up over the past
few months because the dollar has come under persistent selling
pressure as markets started to price in economic slowdown and falling
interest rates in the United States.

David Murrin, chief investment officer at Emergent, thinks the
chances of a redenomination are high, but that it could take some
time.

"I can see countries like Russia trying to price commodities in
some other currency, possibly roubles," he said. "Keep your eyes
open for when and how rebasing starts to creep in."

The move away from dollars has already started in Iran, which said
this month that about 85 percent of its oil exports were being sold
in non-U.S. dollar currencies.

Many other commodity producing countries have or are talking about
diversifying their reserves away from the dollar.

The U.S. Federal Reserve in September slashed benchmark interest
rates by half a percentage point to 4.75 percent, narrowing the
interest rate differential against other currencies and prompting
heavy sales of dollars and related assets.

Growing speculation that the U.S. central bank will have to cut
rates again, at least once more before the end of this year, to
stave off economic slowdown, sparked a fresh bout of dollar sales
this week.

Open door

"The potential for the dollar's downtrend to pick up speed is high
and that's what they (the U.S.) want," Murrin said.

"They've opened the door to a lower dollar simply because it's their
job to keep up the illusion that asset prices in the United States
are high. ... That makes their debt-to-equity ratios look interesting."

The problem for the United States for many years has been its current
account deficit at around 5.5 percent of gross domestic product.
Overseas investors have financed it by buying U.S. assets such as
stocks and bonds.

But if investors started to believe that U.S. assets were overpriced,
then confidence could quickly disappear and leave the United States
on the verge on bankruptcy, Murrin said.

"A way to stimulate your economy is to let the currency go," he
said, adding that this ploy could be dangerous as it could further
fuel inflation in an environment of rising commodity prices.

Murrin thinks the commodity bull run could continue for another "20
years at least."

"What I think is alarming is that we're behaving as if we're at the
end of the cycle," he said.

"There are too many people and too few resources, there are too
many of us fighting over the same resources. ... We're facing a
huge global crunch in terms of natural resources."

In previous times countries have gone to war over natural resources.
This time, so far, there are no guns or tanks.

The ammunition is money accumulated by resource-rich countries like
China and Russia over the past few years.

"Now there are few places to expand," Murrin said. "China has gone
into Africa. You could go to Antarctica."

This year Russia planted a national flag in the Arctic, home vast
untapped gas and oil reserves.

Emergent Asset Management does not disclose it assets under management
or returns.
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> Charlie Falconer is apparently slagging off Gordon Brown for not
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> He's timed his announcement to hurt Brown and the Labour Party.
>
> If you look closer he's done a job for just a few years part time and
> so will get a 50k +   pension- how long would you have to work for
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>
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