Oil near $111 as Gustav relents, dollar firm

Oil near $111 as Gustav relents, dollar firm
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First Published: Tue, Sep 02 2008. 09 38 AM IST
Updated: Tue, Sep 02 2008. 09 38 AM IST
Hong Kong: Oil extended losses toward $111 on Tuesday after Hurricane Gustav eased before slamming into the US Gulf Coast, pushing up the US dollar to a 7-month high against the euro and causing a broad selloff of commodities.
The South Korean won recovered after a steep decline on Monday, supported by the government which said in a hastily arranged meeting it had the will and ability to stop the currency from weakening.
However, stocks slipped further on fears about a flight of capital from Asia’s fourth-largest economy.
Economic deterioration and public unrest in the region continued to take a toll on its political establishment. Japan’s unpopular prime minister resigned late on Monday , which had a limited impact on the equity and bond markets, and a state of emergency was declared in Bangkok, which weighed on the baht.
Crude’s retreat, on top of a steep $4 fall on Monday, weighed on US corn and soy prices, which fell 3% after a US holiday on Monday.
The euro was down a modest 0.1% at $1.4583 after earlier dipping to around $1.4555, the lowest since February 14.
The British pound was down 0.5% at $1.7921 extending losses after an 8.6% plunge in August.
Japan’s Nikkei share average rose 0.45%, as lower oil prices encouraged investors to buy beaten down shares of companies in the technology sector after a sharp selloff on Monday.
Investors were grappling with the implications of Fukuda’s resignation, which made him the second Japanese leader to resign in less than a year and threatened policy vacuum as the economy hangs on the brink of recession.
South Korea’s KOSPI was down 0.1% after earlier slipping to its lowest since March 2007.
The country’s worsening balance of payments has made investors nervous that nearly $7billion of government bonds held by foreign investors maturing next week will not be rolled over.
The MSCI index of Asia-Pacific equities outside of Japan edged up 0.2% after earlier touching the lowest since March 2007. The index has fallen 28% so far this year.
Investors took refuge in the US dollar, shying away from slowing economic growth in Southeast Asia and in particular political uncertainty surrounding Thailand.
The dollar rose 0.4% against the Thai baht to 34.42 after Thailand’s prime minister declared a state of emergency in Bangkok and gave the army control to quell long-running protests.
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First Published: Tue, Sep 02 2008. 09 38 AM IST
More Topics: Markets | Global | oil | dollar | US |