Dollar Losing Value, Oil Investors Diversifying to
European and Chinese Currency
Three articles from Reuters (below) report that investors from the oil rich Gulf Arab nations are “eager” to diversify away from the U.S. currency. Reuters reports movement to the Euro and Asia “to invest windfall oil revenue, eager to ride the rise of China and India.” On Monday, Reuters reported that the Dubai International Financial Centre Authority said “More Gulf economies will move away from a dollar currency peg and shift foreign exchange reserves away from dollar to other currencies.”
The articles indicate concern over security and the potential of further attacks in the U.S. They also report that the International Monetary Fund “argued ‘extraordinarily aggressively’ for a correction in exchange rates, above all so as to reduce the massive U.S. current account deficit.” The Chinese yuan and currency of Gulf oil states “should all appreciate” according to the report of the World Economic Outlook due to be published in April. And, the European Central Bank will “not require further interest rate increase.”
According to Reuters there has also been “a marked shift . . . in the types of investments.” The Gulf investors are now investing more in “real estate, infrastructure, telecoms, and banking” rather than “stocks and bonds” after learning the lessons of investing in speculative stocks. This will become seen as a “reverse globalization” where Gulf oil states purchase developed institutions.
Thus, as the U.S. economy falls further into debt, due to the cost of the war and the rising cost of oil, the Middle East and Asia will become wealthier. And, as the dollar depreciates the U.S. consumer will feel the loss of wealth of the United States. (Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).
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By Daliah Merzaban
DUBAI -- Gulf Arab investors are increasingly looking to Asia to invest windfall oil revenue, eager to ride the rise of China and India and diversify away from their traditional ties with the United States.
"If you look at some of the big investment houses in the region, their appetite for Chinese is high," Nasser al-Shaali, chief executive of the Dubai International Financial Centre (DIFC) Authority, told the Reuters Middle East Investment Summit this week.
Public and private companies in the world's largest oil-exporting region want to take luxury hotel and resort brands to Beijing and Shanghai, invest in Indian power stations, and funnel billions of dollars into Pakistani real estate.
"What you are going to see is a capital moving eastward from the Middle East," said Shaali, whose dollar-based investment zone in the Arab world's commercial hub hopes to eventually rival financial centers in London, New York, and Hong Kong.
Gulf Arab investors have spent around $94 billion on foreign mergers and acquisitions since 1997, about two-thirds of that in 2005 and 2006.
But only 10-15 percent of the $1.1 trillion surplus regional oil producers accumulated between 2003 and 2007 has entered regional economies, Shaali said.
The United States, a traditional home for parking petrodollars, may be falling out of favor as investors count the risk that assets in the U.S. could be targeted over security concerns since the September 11, 2001, attacks.
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