Bloomberg BusinessWeek

Dollar Depressed by OPEC Slashing Treasury Holdings by 9%
Bloomberg BusinessWeek

Oil-exporting countries are cutting holdings of U.S. government debt as energy prices rise, helping depress the dollar, the worst-performing major currency of the past six months.

Treasuries owned by oil producers and institutions such as U.K. banks that are proxies for Middle East nations fell 9 percent in the second half of 2010 to $654.6 billion, the first decline in the final six months of a year since the Treasury Department began compiling the data in 2006. The sales may continue, if history is any guide, because Barclays Plc says Middle East petroleum exporting nations have traditionally placed only 25 percent of their savings in dollar-based assets.

The appeal of the dollar has diminished as the Federal Reserve keeps interest rates at almost zero, prints cash to purchase $600 billion of bonds in a policy known as quantitative easing and the budget deficit holds above $1 trillion. The currency fell to 61.3 percent of global foreign-exchange reserves in the third quarter, from a peak of 72.7 percent in 2001, the latest International Monetary Fund data show.