Crude oil reaches $109.72, breaks records for 5 days running on weak dollar

Crude oil rose to a record for a fifth day, climbing above $109 a barrel in New York, after the weak dollar prompted traders to invest in commodities. Crude oil for April delivery rose 85 cents to settle at $108.75 a barrel at 2:46 p.m. on the New York Mercantile Exchange, a record close. Futures surged to $109.72 a barrel today [11 Mar 2008], the highest since trading began in 1983. "The decline of the dollar has a lot to do with the rise in prices," said Frank Verrastro, director of the Center for Strategic and International Studies energy program in Washington. "People are looking at the oil market as a safe place to park their money in this time of economic uncertainty." The euro rose to $1.5495 against the dollar, the highest since the single currency's introduction in 1999, after European Central Bank council member Axel Weber said he doesn't see any leeway to lower borrowing costs.

The U.S. Dollar Index [USDX], a weighted gauge against the euro, yen, pound and three other currencies, fell to the lowest since the basket started trading in 1973 on March 7. The index touched 72.474 today, just short of the record low of 72.462. "This is all about the dollar," said Adam Sieminski, Deutsche Bank's chief energy economist in New York. "We started the year with the dollar index at 76 and the drop to 72 has been good for a $15 gain in oil," Sieminski said, "When the index hits 70 the price of oil will hit $120."

- The technical analysis story for crude oil gets more interesting all the time. It looks like we have moved very quickly into the $105-110 trading range, much faster than expected. The next resistance levels look to be $110, $120, $150 and $200, and support levels remain at $100, $95, $89 and $85. Lots of people have been looking for a pullback and wondering just where it will happen at, but crude simply keeps powering higher.

China inflation surges to 8.7% in Feb 2008, highest in 11 years

bloomberg.com :

China's inflation accelerated to the fastest pace in 11 years in February [2008] as food and energy prices jumped, increasing the likelihood the central bank will raise interest rates. Consumer prices climbed 8.7% from a year earlier after gaining 7.1% in January, the statistics bureau said today [11 Mar 2008]. Inflation has surged since March last year on costs of staple foods such as pork and cooking oil. China's worst blizzards in half a century pushed up food and fuel prices because transport bottlenecks disrupted supplies.

Dousing inflation is the government's top priority, Premier Wen Jiabao told China's legislature last week. Six interest-rate increases last year and the highest reserve requirements ever for banks have failed to tame inflation mainly driven by soaring food costs. The key one-year lending rate is 7.47%. The deposit rate is 4.14%, less than half the pace of inflation.

channelnewsasia.com :

China's inflation hit a near 12-year high of 8.7 percent in February, the government said Tuesday [11 Mar 2008] as it called for a "cool-headed" response to one of the nation's most pressing economic concerns. Food prices, the main driver of inflation, were up 23.3% in February from a year earlier. The price of pork, the nation's favourite meat, was up 63.4%.

Coming just days after the central bank governor said there was room for hiking interest rates further, analysts said they expected a broad monetary policy response. For China's communist rulers, inflation is of particular concern because it threatens to lead to social unrest and fuel anger at the government, as was the case in the lead-up to the 1989 democracy protests that the military crushed.

- We've got China CPI inflation going at 8.7%, India inflation going over 5%, Iran inflation flying at 19.6%, South Africa inflation accelerating "unexpectedly" to 8.8%, and Singapore inflation hitting 6.6%, a 25-year record high. There is no question that this inflation is global in nature, accelerating in speed, and taking off exponentially.

At least the Chinese savers have the small consolation that their deposit rates are just about half of the reported CPI inflation rate, compared to Singapore where the savings interest rate compared to the inflation rate is ridiculous and borders on the farcical. For say, DBS, the fixed deposit rate for $50,000 and above, 12-mth deposit, is 1.20%, which is 5.5 times less than the inflation rate, and for amounts less than $50,000 it is 0.825%, which is 1/8 the inflation rate. Savings accounts is where the situation gets farcical. The rate of inflation is running 24 to 26 times faster than the 0.25% to 0.275% savings account interest rate.

And I don't really want to get started on the savings rates compared to the M3-to-GDP differential, which is a more accurate reflection of actual inflation. But if you really want to talk about that, we are talking about inflation, as measured by M3-to-GDP, outrunning savings rates by a factor of 68 to 75 times. It's no wonder that Singaporeans are worried about inflation, as reflected by Singapore being the number 1 city ranking on Google Trends on queries for "inflation".