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Oil up in Asian trade on news of currency truce

india Updated: Oct 25, 2010 13:44 IST

AFP
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Oil prices rose in Asian trade on Monday as the dollar weakened after G20 economies agreed to avoid potentially destabilising competitive currency devaluations, analysts said.

A softer US currency makes dollar-denominated oil cheaper, perking up demand and leading to higher prices.

New York's main contract, light sweet crude for delivery in December, rose 0.73 cents to 82.42 dollars a barrel in morning trade. Brent North Sea crude for December delivery jumped 61 cents to 83.57.

"Oil is heading up as a direct result of the US dollar coming down against the euro and the yen," said Victor Shum, an analyst with energy consultancy Purvin and Gertz in Singapore.

The dollar changed hands at 81.09 yen in Tokyo morning trade, down from 81.34 in New York on Friday.

The euro fetched 1.4023 dollars, up from 1.3949. It bought 113.67 yen from 113.24 Friday.

G20 finance ministers and central bank governors meeting over the weekend in the South Korean city of Gyeongju agreed on a framework to tackle large current account surpluses and reduce global trade imbalances, but shied away from specific targets.

"The US dollar is weakening because of the agreement out of the G20 finance ministers meeting, namely that there's not going to be competitive currency devaluations," Shum told AFP.

"The market interpreted the agreement as a go-ahead signal to the United States to do a second round of quantitative easing, so the dollar is heading down." The US Federal Reserve is expected to flood its banking system with money by buying securities as part of efforts to stimulate the economy, a move that would put downward pressure on the dollar. Shum said a hurricane in the Atlantic Ocean is also helping keep prices higher on fears it could threaten crude oil facilities in the US Gulf Coast.