Is the dollar playing with fire?

[Rolo]

I´m thinking it is clear by now - politicians around the world are sending messages to the whitehouse - they want to see a stable dollar - question will be if Bush will gamble and ignore them, or if he will react. The next months could become VERY interesting.

Alexei Ulyukayev, first deputy chairman of the Russian central bank, hinted that Moscow would step up its ongoing policy of shifting more of its $113.1bn of foreign exchange reserves from dollars into euros. This in turn raised the spectre of Asian central banks with higher reserves still following suit.

"A move to say 40 per cent euro from possibly around 30 per cent is a notable amount and highlights the support the euro may be deriving at present when you consider other central banks may also be diversifying out of the dollar," said Derek Halpenny, senior currency economist at Bank of Tokyo-Mitsubishi.

Neil Mellor, currency strategist at Bank of New York, raised the prospect of a potential domino effect: "Talk of central banks readjusting their reserves to encompass a greater euro weighting has been rife in the foreign exchange markets for quite some time, along with speculation that OPEC members may shift to euro-denominated oil sales.

"A dam can only take so much pressure. Russia's stated intent to review its reserve weightings, in favour of the euro once again, could well lead to similar announcements by its counterparts across the world."

Even comments from Purnomo Yusgiantoro, the president of OPEC, that the dollar is still "the best" currency in which to denominate oil failed to offer much support for the greenback.

http://news.yahoo.com/news?tmpl=story&u=/f...c4500000e2511c8