Soaring oil prices and deficit worries hound the dollar again

A series of factors sent the dollar tumbling vis-à-vis the international majors as the greenback plummeted to a 13-month low against the Australian dollar, 2-month bottom versus the euro and 2 and a half-month floor against the sterling.
Crude oil surged to as high as $54.82 per barrel in the Japanese session on increasing demand concerns to the detriment of limited supplies. Further pressurizing the dollar were Fed Governor Bernanke’s comments on one hand, which indicated reducing possibility of accelerated interest rate hikes while a top ECB official remarked that medium-term inflationary pressures have built up due to excess liquidity thus suggesting that ECB maybe leaning towards raising interest rates.
The single European currency broke past the resistance of 1.3310 to soar as high as 1.3358 while cable skyrocketed above the 1.93 mark to touch a peak of 1.9328.
Notwithstanding the pressure of rising oil prices on the Japanese economy, the yen briefly touched above the 104.50 mark to trade around the 104.65 mark in the early Japanese session. Persistent purchases by foreigners continued for the 19th consecutive week sending Nikkei surging towards the 12,000 mark.
Currency markets would be eagerly looking forward to the release of US trade deficit figures for January due to be released on Friday which is expected to widen to $56.5 billion compared to previous month’s figure of $56.4 billion.
In a report released by the Bank of International Standards, the Asian Central Banks were seen cutting their reserves held in dollar from 81% in 2001 to 67% in September 2004.