Sunday, August 31, 2008

Crude, Gasoline advances as forecast by EES

Crude Oil, Gasoline Advance as Gustav Cuts Production, Refining

By Gavin Evans and Margot Habiby

Sept. 1 (Bloomberg) -- Crude oil and gasoline futures rose as Hurricane Gustav approached the U.S. Gulf coast, halting most regional oil and gas output and shutting local refineries.

Gustav, about 215 miles (350 kilometers) south-southeast of the Mississippi River mouth, will make landfall along the Louisiana coast later today as a ``major'' hurricane, according to the U.S. National Hurricane Center. Wind and sea conditions have reduced the chances of ``significant intensification,'' the center said.

``There are still some production rigs in the way'' of a major storm, said Gerard Burg, energy and minerals economist at National Australia Bank Ltd. in Melbourne. ``We're just going to have to wait and see what kind of impact it's going to have.''

Crude oil for October delivery rose $1.52, or 1.3 percent, to $116.98 a barrel in after-hours electronic trading on the New York Mercantile Exchange at 9:45 a.m. in Sydney. Prices, which dropped 7 percent in August, are up 22 percent this year.

Gulf Coast refineries have cut at least 1.56 million barrels a day of production, about 9.8 percent of the U.S. total. Eight refineries have announced shutdowns, while another five have reduced capacity.

Personnel from more than 70 percent of the platforms and rigs in the Gulf have been evacuated as the storm approaches, the U.S. Minerals Management Service said in a statement on its Web site yesterday. About 1.25 million barrels a day of oil, and 6.09 billion cubic feet of gas have been shut, or more than 96 percent of offshore oil output and 82 percent of gas production.


Here's a link to a really good map of oil refining/SPR storage facilities in respect to the path of Katrina (NB: OLD TRACK MAP!) and here is a listing of production and refining capability for the state of LA.

Just to give you a rough idea of where things are, the map above is a probability swath for Katrina (OLD TRACK MAP!) with the Thunder Horse platform as the red dot, and the other purple dot represents the Mad Dog development (100,000 bd); the Holstein development that produces at peak, around 100,000 bd of oil; and the Atlantis field that may have ramped up to around 200,000 bd in all. Put together these projects have the potential of around 650,000 bd, but as can be seen, they were sitting in an uncomfortable spot relative to the track of the Katrina.The white dot is where Port Fourchon is.  This is where the Louisiana Offshore Oil Port, or LOOP, is located. Rigzone pointed out that this is where the foreign tankers offload, Google and Terraserve maps you can see that the area is very low-lying.  One of the big concerns is that there will be sub-sea landslides or other ground movement that might affect the LOOP.  Were this to be disrupted, then foreign tankers would need to be diverted elsewhere, with the likely port being Houston.

Here is a really good link/map (from "Rod and Reel" no less) of the LA southern coastline showing all of the Submersible and Floater Gulf rigs.

We have accumulated resources from previous hurricans below, but we'd like to find updated materials if you know of them. Recent refinery maps, recent rig maps in the gulf, recent gas fields, SPR facilities, the Intercoastal Canal, pipeline stations and transfer points, etc., etc. Leave links in the comments please.

Also, here's the EIA's Alabama, Louisiana, Mississippi, and Texas Resources pages. They will also likely come in handy. Also, here's a link to the national page.

Here's another good resource for infrastructure maps and such. (scroll down a bit)

Here's a map from CNN with large and small refineries laid out. (though it is an old storm track)

Very detailed piece by RIGZONE on rigs and other infrastructure in the area. (thanks mw)

Here's a flash graphic of the oil refineries and rig maps from Hurricane Rita, it emphasizes Beaumont and Galveston's importance. Click on oil production in the tab. Note the many rigs on the east side of the storm that will get the brunt of the damage from the NE quad of the storm...hence the high long-term GOMEX oil production damage estimates below.

Here's a link to Rigzone's coverage of Gustav.

You want a detailed map? Well here's the probably the best MMS map I could find. Very detailed and lots of interesting stuff. (VERY big .pdf warning)

Also, Scott Wilmoth at Simmons & Co was kind enough to send us this map. The map below captures only deepwater infrastructure. For a complete list of deepwater development systems (includes operator, depth, location):

(Please deposit new relevant links, graphs, and comments in this new thread...we have updated the resources part of this post with new maps and some more old maps and articles from Katrina on the LOOP and Port Fourchon--important parts of the infrastructure, as we learned about three years ago. Please leave personal anecdotes and themes unrelated to hurricane for the other upcoming 'bigger picture' posts, as yesterdays information was difficult to upload for those on dial-up)

Friday, August 29, 2008

Russia may cut off oil flow to the West

Fears are mounting that Russia may restrict oil deliveries to Western Europe over coming days, in response to the threat of EU sanctions and Nato naval actions in the Black Sea.

Any such move would be a dramatic escalation of the Georgia crisis and play havoc with the oil markets.

Reports have begun to circulate in Moscow that Russian oil companies are under orders from the Kremlin to prepare for a supply cut to Germany and Poland through the Druzhba (Friendship) pipeline. It is believed that executives from lead-producer LUKoil have been put on weekend alert.

"They have been told to be ready to cut off supplies as soon as Monday," claimed a high-level business source, speaking to The Daily Telegraph. Any move would be timed to coincide with an emergency EU summit in Brussels, where possible sanctions against Russia are on the agenda.

RBV8 RBOB Buy for weekend hurricane info
29 (Bloomberg) -- Tropical Storm Gustav pounded Jamaica with rain, flooding streets with water and mud, as Louisiana prepared for the system to strengthen

* Strong dollar pressures oil, balancing Gustav support, UK - 1 hour ago
NEW YORK, Aug 29 (Reuters) - Oil prices were nearly unchanged by midday Friday as a stronger dollar balanced concerns that Tropical Storm Gustav will impact

Thursday, August 28, 2008

Bernanke, Aiming to Curtail Market Risks, Met NYSE, CME Chiefs

Bernanke, Aiming to Curtail Market Risks, Met NYSE, CME Chiefs

By Scott Lanman

Aug. 28 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke, aiming to curb risks in derivatives markets, met in June with NYSE Euronext Chief Executive Officer Duncan Niederauer and CME Group Inc. Chairman Terrence Duffy.

The Fed chief met on June 17 with Niederauer and on June 27 with Duffy, according to Bernanke's schedule for the month, released to Bloomberg News after a Freedom of Information Act request. CME is the No. 1 futures exchange in the U.S., and NYSE Euronext is the world's biggest owner of stock exchanges.

Bernanke and Duffy ``discussed a number of economic issues, including the credit markets and over-the-counter derivatives,'' CME spokesman Allan Schoenberg said in an e-mail message.

The central bank is trying to improve processing of trades in the $454 trillion over-the-counter derivatives markets, an effort Bernanke said last month would help the financial system ``withstand future shocks.''

The New York Fed and 17 securities dealers including Goldman Sachs Group Inc. and JPMorgan Chase & Co. agreed in July to form a central counterparty for the credit-default swap market that could absorb the failure of one of the major dealers.

Fed officials began urging banks in 2005 to improve processing of credit-default swaps as a backlog of unsigned trades ballooned to the equivalent of more than 17 days of trading volume.

CME and NYSE are seeking to expand into the $62 trillion market for credit default swaps, which let investors bet on the likelihood that companies will fail to repay debt. NYSE spokesman Richard Adamonis declined to comment.

Derivatives are financial instruments derived from stocks, bonds, loans, currencies and other assets, or linked to specific events like changes in the weather or interest rates.

At Risk

The amount U.S. commercial banks have at risk in derivatives markets jumped 50 percent in the first quarter as the credit crisis triggered an increase in the value of the contracts, the Office of the Comptroller of the Currency said last month.

Bernanke in June also continued weekly breakfasts with Treasury Secretary Henry Paulson. The Fed chief met twice with Securities and Exchange Commission Chairman Christopher Cox as they worked out an agreement on sharing information about the capital and risk-management systems of securities firms.

Bernanke had lunch at the White House with President George W. Bush on June 3. Earlier that day, the chairman had given a speech voicing concern about the declining value of the dollar.

The Fed chief delivered private remarks on June 6 to the Bilderberg Group, a gathering of North American and European government and business leaders, at a hotel in the Washington suburb of Chantilly, Virginia.

U.K. Leaders

Bernanke also met with a number of British officials. He met in his office on June 5 with Howard Davies, director of the London School of Economics, who formerly served as chairman of the U.K. Financial Services Authority and deputy governor of the country's central bank.

The daybook shows Bernanke also met for about 30 minutes on June 6 with George Osborne, Treasury spokesman for the U.K.'s opposition Conservative Party.

The British Embassy in Washington hosted a dinner on June 24 for the Federal Open Market Committee while policy makers were in town for a two-day meeting on interest rates.

To contact the reporter on this story: Scott Lanman in Washington at

Last Updated: August 28, 2008 11:30 EDT

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Wednesday, August 27, 2008

Real Estate adjusted for inflation negative first time since 1960
HYPERINFLATION SPECIAL REPORT President Bush yesterday telegraphed in the clearest possible way that he's not interested in turning down the heat on the simmering geopolitical conflict with Russia. Quite the contrary. He's sending Vice President Cheney to harry Russia's borders.

Sunday, August 24, 2008

Money dries up like the Great Depression

"The growth in bank loans has turned negative" (while) "the overall debt burden in the US economy is currently at record levels, raising concerns that a recession - if it occurs - could set off a sharp downward spiral."...

The Fed will have to cut the Fed Funds rate much more as severe downside risks to growth and to financial stability will dominate any short-term upward inflationary pressures. Leaving aside the risk of a collapse of the US dollar given this easier monetary policy the Fed Funds rate may end up being closer to 0% than 1% by the end of this financial crisis and severe recession cycle."

Interest rates are going down not up as the futures market believes.

"The recent plunge in M3 (ed.--M3 is the broadest measure of money used by economists to estimate the entire supply of money) makes it likely that credit lines have been fully tapped and/or banks have simply turned off the spigot. Liquidity shrinks by the day. Banks scrambling to refinance long-term debt are going to have a very tough go of it. Weekly unemployment claims are soaring. Consumers out of a job are going to have a tough time paying bills. Those looking for a bottom in these conditions are simply barking up the wrong tree."

Anderson said in the interview that too many people in the post-Depression era generations "play the accumulation game" to see "who can buy the most toys." But he said most people who play this game never feel like they win because "they always want more toys."

His parents taught him to "play another game," one whose object is to "see what we can really live without."

The sheer volume of this nation's national debt, consumer debt and war debt are beyond most Americans to envision. Trained by generations of "we put a man on the moon and we an do anything" mentality, the concept of economic and social collapse is beyond our ken.

The old joke was that Vermonters were already so poor that they barely noticed the Great Depression.     Honest Central Bankers...

...Would Admit Mistakes Today's Financial Mess Is Largely Result of 3 Errors

Roubini: It’s a subprime financial system

Investors should also command the procedures, technology and internal controls needed to trade an instrument and manage the risks associated with it, the policy group says. Furthermore, they should be wealthy enough to be able to absorb potential losses. Authorization to invest in complex, high-risk investments should come from the highest levels of management.

UBS AG, Merrill Lynch & Co., Citigroup Inc., HSBC and Wachovia Corp. presumably satisfy these criteria and surely regard themselves as financially sophisticated. Yet they and other institutions worldwide have racked up $505.5 billion in losses and writedowns because of the mortgage meltdown.

Aug. 22 (Bloomberg) -- It's hard to forget your first Nouriel Roubini experience.

Fifteen months ago, I watched an Asian Development Bank audience in Kyoto squirm and fidget as the chairman of Roubini Global Economics LLC gave his bleak, contrarian opinion that the global financial system was about to hit a wall.

``After listening to you, I feel like I need a drink or a hug or something,'' I joked to him afterward. Roubini gets a lot of such quips, and as his direst predictions about a once-in-a- lifetime bust in the U.S. economy come ever closer to reality I find myself hoping he'll be proven wrong.

Hats off to Roubini. How many times in the past year did we hear people say ``this credit crisis is containable'' or ``the worst is over'' or ``subprime-loan problems won't spread to other asset classes,'' and the like?

Roubini didn't waver, and he took considerable flack for it.

That said, Asia had better hope Roubini's economic fears are proven wrong. Ditto for the gloomy predictions of Oppenheimer & Co. analyst Meredith Whitney, who recently was toasted on the cover of Fortune magazine.

Perhaps the magazine-cover curse will kick in and the attention being tossed at Roubini, profiled last week by the New York Times, and Whitney means the worst really is over. Of course, they might say it's just a matter of public perception catching up with the reality -- a financial system in tatters.

Subprime System

One reason to think Roubini won't be proven wrong is his argument that the problem isn't the subprime mortgage market -- it's a subprime U.S. financial system. Fixing the problems sending financial contagion around the globe will require tough decisions in Washington and reforms in Wall Street's securitization system. And that's hardly happening.

How far Wall Street's reputation has fallen since the collapse of Bear Stearns Cos. was revealed by the Aiful Corp. saga. Japan's biggest consumer lender by assets threatened to sue Lehman Brothers Holdings Inc. in June after analyst Walter Altherr called Aiful ``arguably insolvent'' in a report.

Lehman retracted the report earlier this month, yet not before Japan's investment community had a good chuckle. The fourth-largest U.S. securities firm, with a share price down 79 percent this year, calling another institution shaky? Talk about the proverbial pot calling the kettle black.

`Muddle Along'

Even the best-case scenario for Asia looks gloomy. As analysts like Mark Matthews of Merrill Lynch & Co. in Hong Kong point out, the next few years will see Asia-Pacific markets excluding Japan ``muddle along.'' Wasn't it just a year ago that investors were claiming Asia had decoupled from the U.S. economy?

The reasons Asia should hope Roubini eats some crow are many.

For one, the region remains too reliant on exports. While Asia made some progress boosting domestic demand, slowing U.S. growth will chip away at living standards from Seoul to Jakarta. For another, emerging markets may slide further if global investors become even more risk adverse.

Mark Mobius, executive chairman of Templeton Asset Management, may indeed be right to call the decline in emerging- market stocks ``overdone.'' Still, a deep recession in the world's biggest economy could accelerate those losses.

Asia central banks amassed trillions of dollars of currency reserves in recent years, a move that won't seem illogical if Roubini is proved correct. That cash will be needed to provide insurance to global investors that the region won't see a repeat of its 1997 crisis.

U.S. Contagion

A decade ago, Asia was exporting financial contagion potent enough to send the Dow Jones Industrial Average down hundreds of points here and there. These days, the U.S. is returning the favor, just as Diwa Guinigundo, deputy governor of the Philippine central bank, predicted to me a year ago. Hats off to Guinigundo; he was absolutely right.

Where do we stand now? ``One year later, in the U.S. the lack of improvement in the money markets is still taking center stage,'' Roubini said yesterday. And the Federal Reserve, on top of cutting its benchmark interest rate 325 basis points, continues to expand its liquidity facilities ``without significant impact on credit creation.''

That's affecting emerging markets. For example, Roubini said, ``the global credit crisis has exacerbated home-grown liquidity squeezes in countries like South Korea.''

The question is how Asia would weather further weakness in the U.S. China's boom has provided some cushion, yet officials in Beijing are busily working to tame inflation. It also would be a mistake to think a U.S. recession won't slam China.

So here's to Roubini for having a good couple of years of economic prognosticating. And here's to hoping he'll be less right in the future. Asia's prosperity may depend on it.

(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: William Pesek in Tokyo at

Last Updated: August 21, 2008 20:23 EDT

Friday, August 22, 2008

this painful ordeal is far from over The futures market is pricing a 33pc fall in US house prices from peak to trough, based on the Case-Shiller index. Banks have not come close to writing off implied losses on this scale.

Daniel Alpert from Westwood Capital predicts that a mere 28pc fall would alone lead to a $5.4 trillion haircut in US household wealth, and leave lenders nursing $1.25 trillion in losses. So far they have confessed to less than $500bn.

Meredith Whitney, the Oppenheimer's bank Cassandra, predicts a gruesome 40pc fall in prices. If so, expect prime borrowers facing negative equity to start throwing in the towel en masse. "I do not think we are near the end of writedowns. I continue to see capital levels going lower, and stocks going lower," she said.

So no, this painful ordeal is far from over. We are not witnessing a dollar rally so much as a collapse in European and commodity currencies. The race to the bottom has begun in earnest.

Thursday, August 21, 2008

Market finally realizes Russia has OIL

Oil Rises More Than $3 on U.S.-Russia Tensions, Dollar Weakness

By Mark Shenk

Aug. 21 (Bloomberg) -- Crude oil advanced more than $3 on speculation that rising tensions between the U.S. and Russia may disrupt the flow of oil, and as a weaker dollar bolstered the appeal of commodities.

Russia, which vies with Saudi Arabia as the world's biggest oil producer, criticized U.S. plans for a missile shield in Poland. Russia's invasion of Georgia has cut some export routes for Caspian Sea crude. Oil and gold climbed as the dollar fell to the lowest against the euro in a week.

``The fall of the dollar is sending a huge investor flow into commodities,'' said Gene McGillian, an analyst at TFS Energy LLC in Stamford, Connecticut. ``The tensions between Russia and the West were supposed to be simmering down but they are now ratcheting up because of Poland's agreement with the U.S.''

Crude oil for October delivery rose $3.72, or 3.2 percent, to $119.28 a barrel at 9:10 a.m. on the New York Mercantile Exchange. Futures are down 19 percent from a record $147.27 reached on July 11. Prices are up 71 percent from a year ago.

Brent crude oil for October settlement rose $3.48, or 3 percent, to $117.84 a barrel on London's ICE Futures Europe exchange.

``The dollar has been the big driver of both the rally and the pullback,'' said Kevin Kerr, president of Kerr Trading International in Wilton, Connecticut.

The dollar fell 0.3 percent to $1.4796 per euro, from $1.4747, and touched $1.4833, the weakest since Aug. 14.

``The hope was that Russia's fields would be developed and the barrels made available,'' Kerr said. ``If you are a multinational, you are already afraid of nationalization of your assets. Now, with the recent problems between Russia and its neighbors, nobody is going to invest there.''

Foreign Control

TNK-BP, a 50-50 venture between BP Plc and a group of billionaires known collectively as AAR, is embroiled in a dispute over strategy and management. BP, which relies on the company for almost a quarter of its output, is struggling to maintain control amid pressure on foreign employees.

U.S. gasoline supplies fell 6.2 million barrels last week, the U.S. Energy Department said in a report yesterday, more than double analysts' predictions. Crude-oil stockpiles rose 9.39 million barrels to 305.9 million barrels, the biggest gain since March 2001, the report showed. Stockpiles fell the previous week when Tropical Storm Edouard hit Texas.

Fuel Production

Refineries operated at 85.7 percent of capacity in the week ended Aug. 15, down 0.2 percentage point from the week before and the lowest since the week ended May 2, the report showed.

``The market shrugged off the big crude build because they attributed it to delayed imports that couldn't arrive during the week of Edouard,'' McGillian said. ``More attention was paid to the drop in gasoline stocks and refinery runs. If refiners continue to operate at this level we won't be able to build product inventories.''

Gasoline for September delivery rose 8.78 cents, or 3 percent, to $2.9981 a gallon in New York. Futures reached a record $3.631 a gallon on July 11.

Pump prices haven't increased since July 19, according to the AAA, the nation's largest motorist organization. Regular gasoline, averaged nationwide, fell 1.5 cents to $3.702 a gallon, the AAA said today on its Web site. Prices reached a record $4.114 a gallon on July 17.

To contact the reporter on this story: Mark Shenk in New York at

Last Updated: August 21, 2008 09:41 EDT

Wednesday, August 20, 2008

Will EURO survive a Russian invasion?

It is by no means certain whether the EU and the European Monetary Union will even be able to survive the currently detonating financial crisis. And there ought to be an investigation into whether the European Central Bank's incessant injections of liquidity into foundering Spanish banks—which German taxpayers, too, will ultimately have to foot the bill for—is consistent with the ECB's own statutes, which assert that it neither desires, nor is permitted to become a "lender of last resort."

WASHINGTON DC- The Bush administration appears to have pulled off its latest military fiasco in the Caucasus. What was supposed to have been a swiftly and painless takeover of rebellious South Ossetia by America's favourite new ally, Georgia, has turned into a disaster that left Georgia battered, Russia enraged, and NATO badly demoralized. Not bad for two days work.

The stupid party suggests war with Russia – how long before USD is affected?

Stuart Mill, called his conservative party, the Republican Party, "the stupid party."

George Bush said earlier this month that "the age of spheres of influence is over". In that case why push that most potent sphere of influence, Nato, to the Russian border? And what of the sphere-of-influence theory that underpinned Bush's neoconservative plan to conquer the Muslim world for democracy?     Russia has claimed control of this area for most of the past two centuries despite the very steep price required for that control. From 1804 to 1813, Russia battled Persia for control over the South Caucasus in a war that ended at Lenkoran

Tuesday, August 19, 2008

Credit crunch may take out large US bank warns former IMF chief
The deepening toll from the global financial crisis could trigger the failure of a large US bank within months, a respected former chief economist of the International Monetary Fund claimed today, fuelling another battering for banking shares.

Professor Kenneth Rogoff, a leading academic economist, said there was yet worse news to come from the worldwide credit crunch and financial turmoil, particularly in the United States, and that a high-profile casualty among American banks was highly likely.

"The US is not out of the woods. I think the financial crisis is at the halfway point, perhaps. I would even go further to say the worst is to come," Prof Rogoff said at a conference in Singapore.

In an ominous warning, he added: "We're not just going to see mid-sized banks go under in the next few months, we're going to see a whopper, we're going to see a big one — one of the big investment banks or big banks," he said.

Monday, August 18, 2008

What can the fed do Aug. 18 (Bloomberg) -- Ben S. Bernanke is still trying to define which financial institutions it's safe to let fail. The longer it takes him to decide, the tougher the decision becomes.

In the year since credit markets seized up, the 54-year- old Federal Reserve chairman has repeatedly expanded the central bank's protective role, turning its balance sheet into a parking lot for Wall Street's hard-to-finance bonds and offering loans through its discount window to investment banks and mortgage firms Fannie Mae and Freddie Mac.

Saturday, August 16, 2008

EES - What Russian war means for the Euro

EES - What Russian war means for the Euro

The conflict in Georgia is greatly affecting the Euro across the board. What does this all mean, and where should investors go?

FX is extremely sensitive to politics, because a shift in a domestic political system can be directly connected to a currency's value. For example, the Chinese government announcement that the Yuan would float, albeit a 'soft peg' to the USD, shattered the relationship between a previously pegged Yuan and the USD. Many watching the situation in Georgia are unaware how this impacts them, and how it impacts FX. Also, this war, like many wars, is an information war, and the media spin leaves viewers with a less than accurate picture of reality.

The strength of the Euro over the past 5 years has been in part, not European strength as much as American weakness. A combination of economic factors in the US has made investors fear the USD and purchase non-USD based assets in Euros and other foreign currencies. Also, the Fed has been lowering US interest rates to a finally negative real interest rate.

The recent strength in the USD is not USD strength per se, but Euro weakness. The fear is that Europe will be involved in a war with Russia, and energy will be involved. Russia supplies 25% of the EU's energy needs and over 50% to many Eastern European states, and the EU is Russia's largest trading partner, totaling $285 Billion.

Immediately after the 4% drop in the Euro in 2 days, Bank of America issued a warning to its' customers summarizing the situation that, although the USD is showing signs of recovery, a war in Europe does not solve the fundamentally flawed US economy, and they expect further USD weakness.

Russia's involvement in Europe is not only energy. The US has planned military bases in many eastern-bloc countries, one of which has been signed during the crisis in Georgia.

One problem with Europeans is they cannot agree. This is what makes Europe charming and culture-rich but politically complex. USA is a 'melting-pot' which has become a mono-culture based on corporatism, while American's argue their thinking lies in the same direction. Since the US Civil war, US mono-culture has solidified the mainstream in a view that always agrees on some tenets, this is not the case in Europe. Entry into the EU and the Euro passed referendum in many EU states by thin margins, there are those who would like to revert back to national currencies.

One main difference between the Euro and other currencies: the Euro does not have a government behind it. Individual EU states retain their sovereignty, and those states central banks have essentially no power to influence the Euro directly, except for lobbying the ECB. So the Euro is a designer currency hanging on a thin margin, which could be toppled by a severe energy crisis should the situation with Russia escalate. US involvement in Eastern European countries will only increase the chances of Russia's will to turn off the lights.

Russia has already quietly begun selling oil in Rubles, and announced the Ruble is fully convertible (since 2006). While by itself these actions are not market-shattering, combined with the potential conflict in Georgia, and Russia's aggressive policy to capitalize on their vast wealth in natural resources, a situation is brewing in Europe which can be potentially explosive. Any turmoil can be seen as bad for the Euro, regardless of the actual damage done. The disadvantage of Europe is it's history: Europe has been involved in wars and currency devaluations. As poor as the US economic numbers are, the US is involved in foreign wars at its leisure, there is no compelling reason the US should be involved in any war.

Russia can also affect emerging markets which it may be forced to trade with, such as India, China, and Brazil. Russian oil could help a growing Chinese economy and decrease Russia's dependence on European customers. In a complex environment a static forecast is not possible, but it is clear any instability or even the perception of instability close to Europe will be negative for the Euro. Elite E Services believes the next bubble to pop will be the Euro bubble.

Long term, this is a buying opportunity for hard commodities such as Wheat, Swiss Francs, Oil, and Gold. Whatever happens in this war, the supply side in the Oil market is controlled by unfriendly countries such as Venezuela and Iran. If Russia is now added to the list of unfriendly countries, we can expect Oil to increase long term, as Russia will use this as a bargaining chip in any negotiations.

This move has been excellent for CTA's trading momentum and trend-based strategies. For short term gains in the FX or Commodities markets, investors can seek CTA's with established track records or automated trading systems, which are performing very well in environments like this. In fact, desynchronized markets are ideal for systems that monitor and analyze discreet price data vs. fundamentals.

Elite E Services is a registered CTA with the CFTC and NFA Member (#373609).

New Cold war politics: It’s not 1968

The West has mishandled Russia at every point from the death of communism.,25197,24164768-2703,00.html#

"It is government by mobile phone," says one foreign observer.

President Bush's new deal with Poland gives that country millions in aid, stokes Russia's paranoia and decreases America's security. It is bad policy.

President Bush has promised Poland tens of millions of dollars in defense assistance to buy its agreement to deploy 10 anti-missile interceptors he says are necessary to counter a future Iranian missile threat. Here is the punch line: the interceptors don't work and Iran doesn't have any missiles that can reach Europe, let alone the United States. Wait, there's more.

After insisting for two years that the anti-missile base had nothing to do with Russia and was all about Iran, missile defense proponents now say it is all about countering Russia. They cite the conflict in Georgia as justification for their rush to deploy a technology that does not work against a threat that does not exist.

The Bush administration had gone to great lengths to assure Russia that the proposed anti-missile bases in the Czech Republic and Poland are not intended to offset a threat from the Kremlin. Director of the Missile Defense Agency, General Trey Obering, said just one month ago.,1518,572329,00.html Secretary of State Condoleezza Rice has warned that "this is not 1968 and the invasion of Czechoslovakia where Russia can threaten its neighbors, occupy a capital, overthrow a government and get away with it. ... Things have changed." Defense Secretary Robert Gates has threatened to end military cooperation with Russia -- in both bilateral ties and in NATO. "What happens in the days and months to come will determine the future course of US-Russian relations," Gates said. "My personal view is that there needs to be some consequences for the actions that Russia has taken against a sovereign state."

Where does the  EU stand on the future status of the South Ossetia and Abkhazia provinces that officially belong to Georgia?

We have avoided talking about this and I will also avoid discussing it with you. It's one the points where we said that we as the European Union will of course contribute in negotiations, in a sort of mediation or intervention. And we have said from the very beginning what should happen with this. In any case we are backing the integrity of Georgian territory.,2144,3567398,00.html

Friday, August 15, 2008

Commodities fall as Dollar Rises presenting buying opportunity

``Longer term, we would not be surprised to see gold double,'' the bank's analysts John Hill and Graham Wark wrote in a report. ``We would be aggressive buyers at current levels expecting gold to work higher through 2009/10.''

Thursday, August 14, 2008

Multi Currency Expert Advisors One of MQL4's advantages is the fact that it allows users to trade all available symbols shown in the Market Watch window. Expert Advisors usually trade only one currency pair - the one, to the chart of which they are attached. However, there are EAs that trade several symbols simultaneously. We call such programs multicurrency Expert Advisors.

The Championship Rules allow trading 12 currency pairs. This is why it is no wonder that multicurrency EAs were submitted for participation in the previous Championships. They were represented in smaller amounts than single-currency ones, though. In this article, we will consider multicurrency EAs that participated in the Championships of 2006/2007.

Tuesday, August 12, 2008

Georgia: With NATO Shown As Paper Tiger, What Next? Whatever happens in Georgia now, NATO's prospects of expansion have been weakened and its rhetoric exposed. In discussion with Colin Chapman, Stratfor CEO George Friedman says Washington and NATO have very little alternative but to stop further NATO expansion and respect the Russian "sphere of influence."

Crisis in Europe deepens as FX markets stabalize Back in 2005, speaking before a crowd of more than 150,000 exuberant Georgians cheering "Bushi! Bushi!", President Bush made a promise to the people of that former Soviet republic: "The path of freedom you have chosen is not easy, but you will not travel it alone. Americans respect your courageous choice for liberty. And as you build a free and democratic Georgia, the American people will stand with you."

So where was Bush as Russia launched a major military attack against Georgia? Monkeying around with the U.S. women's volleyball players -- and otherwise amusing himself at the Beijing Olympics.

This is not to suggest that Bush should have sent in the Marines. But his impotence in the face of such a gravely destabilizing move highlights not only his personal loss of stature, but how deeply he has diminished American authority on the world stage generally and, particularly, in the eyes of Russia.

In the long term, the best way to take Russia down a notch (along with Iran, Venezuela, and other hostile powers overflowing with oil money) is to pursue policies and fund technologies that slash the demand for oil. The Georgia crisis should make clear, if it isn't already, that this is a matter of hard-headed national security....

Finally, the essentially anti-American and anti-Israeli character of the so-called "anti-imperialist" crowd has been confirmed....

Following are comments from security, political and economic analysts on the crisis: ... "It's payback time by the Russians for what the West did in Kosovo. ..."The military action in Georgia is a reminder to financial markets that geopolitical risks remain significant, even if, in recent times, they have been overshadowed by economic and credit risks...

"If the United States and Europe don't stop Russia, I think this is the end of what we thought of as the post-Soviet era," said Sarah Mendelson, a scholar at the Center for Strategic and International Studies in Washington. ...

Putin's War Games
Heidi Brown , 08.11.08, 6:03 PM ET

The most surprising thing about the Russian invasion of Georgia this week is neither the incursion into another country's sovereign territory nor the vehemence of the attack.

No, most surprising was how the invasion baldly showcased who's really in charge of Russia. While Prime Minister Vladimir Putin met with commanders in South Ossetia and made statements, his anointed successor and Russia's nominal leader, President Dmitry Medvedev, hung around Moscow holding press conferences, thousands of miles from the action--and the world spotlight.

Georgia accused Russia of attacking its Baku-Ceyhan-Tbilisi pipeline, which transports oil from Central Asia to Western markets via the Black Sea. Russia's foreign ministry has denied the attacks, but Georgia claims it is an attempt by Russia to control its infrastructure.

But Putin's true aim is political. As the U.S. continues to build its missile presence at Russia's back door (missile defense systems are being developed in Poland and the Czech Republic) and Georgia and Ukraine cozy up to NATO, Putin is reminding the countries of Central Asia, as well as the West, that Russia still has the wherewithal to wage a successful war.

"Russia's end game is to reassert its sphere of influence," says George Friedman, director of intelligence-analysis firm Stratfor in Austin, Texas.

There's another purpose as well: helping Putin solidify leadership in Russia, backed by the siloviki, a network of former intelligence officials he has at times tolerated and other times embraced throughout his years in power.

Since the presidential elections in May, Moscow's main parlor game is figuring which government faction will prevail: Putin's network or Medvedev's much smaller circle of technocrats and finance folks. Olga Kryshtanovskaya, a sociologist who has spent much of the last two decades studying the business and government elite, argues that Putin has managed to keep--and expand--a powerful network of former intelligence officials and powerful businessmen eager to fulfill his demands.

Despite the surface changes in leadership, Putin retained almost all of his old crowd--former security services cronies like Igor Sechin and Victor Ivanov, who are rumored to be advising him on this action as well as on Russia's request that Georgia's leadership be replaced.

Many in the West hoped Medvedev would be able to build up a block of allies in the Kremlin and begin to push for progress in the government. It didn't happen, says Kryshtanovskaya. "Medvedev's personnel resource is extraordinarily limited. For now he can count on a small group of officials with whom he had worked in the government previously. But in the main, he is surrounded by Putinite cadres."

The aggression against Georgia, despite some self-important public statements by Medvedev, suggests Putin and his circle still have the upper hand.

Putin can use the war against Georgia to show the greater populace of Russia that his view is relevant--even necessary. "Let the West denigrate our military, let them call us retrograde," he might say, but Georgia's actions only show how desperately Russia needs to be strong.

No matter the level of influence Putin's circle of apparatchiks may have, he is sending them a clear message: Your point of view works for me. And I'll be keeping you around for a while.

That means that those who hope for an end to the Putin era will be left waiting for a while longer too. US presidential runoff John McCain said that Russia should not interfere in the conflict in South Ossetia. The pro-Georgian propaganda in the US media testifies to the same opinion. It brings up the idea that the Georgian aggression against the unrecognized republic of South Ossetia has been coordinated with the US administration. Nevertheless, all arguments of US politicians and experts ( interviewed some of them) do not withstand any criticism.

The US military was surprised by the timing and swiftness of the Russian military's move into South Ossetia and is still trying to sort out what happened, a US defense official said Monday.....

Monday, August 11, 2008

Euro drops below 1.50 on War Fears

Aug. 11 (Bloomberg) -- The euro fell to a five-month low against the dollar as fighting between Russia and Georgia spread to a second front, raising concern about stability in Europe.

The dollar's 4 percent surge against the single European currency this month was enough to prompt Bank of America Corp. to tell its customers to exit trades betting on more gains. Morgan Stanley still forecasts the greenback will approach a record low by October as the U.S. housing slump and credit- market losses keep the Fed from raising interest rates this year.,dwp_uuid=7c485a38-2f7a-11da-8b51-00000e2511c8,print=yes.html
Georgia on Sunday said it was pulling its troops out of the separatist province of South Ossetia but its appeals for a ceasefire in the widening conflict in the Caucasus failed to halt Russia's mounting military response.

As the focus of the fighting widened from South Ossetia to Abkhazia, another separatist region, Russian aircraft were reported to have struck at targets inside Georgia, including the civilian airport in the capital Tbilisi.

Local officials said Russia also deployed a naval squadron off the coast of Abkhazia where local separatists have historically enjoyed Russia's support.

The United States is denouncing the Russians as aggressors in the UN Security Council and accusing the Kremlin of engaging in a policy of "regime change," in Ambassador Khalilzad's phrase. The Russian response: "regime change" is "an American invention," but, hey, in Saakashvili's case, it might not be such a bad idea....

"My heart aches at this repetitious history of Russian dominance and aggression, whether Czarist, Bolshevik or Oligarchic," said Thomas Goltz, a US expert on the Caucasus. "We can ask the question: Did Misha [Saakashvili] go too far or get pulled into a trap? But it really makes no difference right now. Russia has just declared the 'post-Soviet era' over and a new age has begun." ...Georgia does not act militarily without the assent of Washington. The Georgian head of State is a US proxy and Georgia is a de facto US protectorate.

Who is behind this military agenda? What interests are being served? What is the purpose of the military operation.

There is evidence that the attacks were carefully coordinated by the US military and NATO.

Sunday, August 10, 2008

Analysis of Georgian-Russian conflict and articles with feedback

The US media makes such a habit of sticking its foot in its mouth every time any combination of the words "Russian" and "military" occur that I think we'll have to assume it's genetic.

In Georgia Clash, a Lesson on U.S. Need for Russia


WASHINGTON — The image of President Bush smiling and chatting with Prime Minister Vladimir V. Putin of Russia from the stands of the Beijing Olympics even as Russian aircraft were shelling Georgia outlines the reality of America's Russia policy. While America considers Georgia its strongest ally in the bloc of former Soviet countries, Washington needs Russia too much on big issues like Iran to risk it all to defend Georgia.

And State Department officials made it clear on Saturday that there was no chance the United States would intervene militarily.

Mr. Bush did use tough language, demanding that Russia stop bombing. And Secretary of State Condoleezza Rice demanded that Russia "respect Georgia's territorial integrity."

What did Mr. Putin do? First, he repudiated President Nicolas Sarkozy of France in Beijing, refusing to budge when Mr. Sarkozy tried to dissuade Russia from its military operation. "It was a very, very tough meeting," a senior Western official said afterward. "Putin was saying, 'We are going to make them pay. We are going to make justice.' "

Then, Mr. Putin flew from Beijing to a region that borders South Ossetia, arriving after an announcement that Georgia was pulling its troops out of the capital of the breakaway region. He appeared ostensibly to coordinate assistance to refugees who had fled South Ossetia into Russia, but the Russian message was clear: This is our sphere of influence; others stay out.

"What the Russians just did is, for the first time since the fall of the Soviet Union, they have taken a decisive military action and imposed a military reality," said George Friedman, chief executive of Stratfor, a geopolitical analysis and intelligence company. "They've done it unilaterally, and all of the countries that have been looking to the West to intimidate the Russians are now forced into a position to consider what just happened."

And Bush administration officials acknowledged that the outside world, and the United States in particular, had little leverage over Russian actions.

"There is no possibility of drawing NATO or the international community into this," said a senior State Department official in a conference call with reporters.

The unfolding conflict in Georgia set off a flurry of diplomacy. Ms. Rice and other officials at the State Department and the Pentagon have been on the telephone with Russia's foreign minister, Sergey V. Lavrov, and other Russian counterparts, as well as with officials in Georgia, urging both sides to return to peace talks.

The European Union — and Germany, in particular, with its strong ties to Russia — called on both sides to stand down and scheduled meetings to press their concerns. At the United Nations, members of the Security Council met informally to discuss a possible response, but one Security Council diplomat said it remained uncertain whether much could be done.

"Strategically, the Russians have been sending signals that they really wanted to flex their muscles, and they're upset about Kosovo," the diplomat said. He was alluding to Russia's anger at the West for recognizing Kosovo's independence from Serbia.

Indeed, the decision by the United States and Europe to recognize Kosovo may well have paved the way for Russia's lightning-fast decision to send troops to back the separatists in South Ossetia. During one meeting on Kosovo in Brussels this year, Mr. Lavrov, the foreign minister, warned Ms. Rice and European diplomats that if they recognized Kosovo, they would be setting a precedent for South Ossetia and other breakaway provinces.

For the Bush administration, the choice now becomes whether backing Georgia — which, more than any other former Soviet republic has allied with the United States — on the South Ossetia issue is worth alienating Russia at a time when getting Russia's help to rein in Iran's nuclear ambitions is at the top of the United States' foreign policy agenda.

One United Nations diplomat joked on Saturday that "if someone went to the Russians and said, 'OK, Kosovo for Iran,' we'd have a deal."

That might be hyperbole, but there is a growing feeling among some officials in the Bush administration that perhaps the United States cannot have it all, and may have to choose its priorities, particularly when it comes to Russia.

The Bush administration's strong support for Georgia — including the training of Georgia's military and arms support — came, in part, as a reward for its support of the United States in Iraq. The United States has held Georgia up as a beacon of democracy in the former Soviet Union; it was supposed to be an example to other former Soviet republics of the benefits of tilting to the West.

But that, along with America and Europe's actions on Kosovo, left Russia feeling threatened, encircled and more convinced that it had to take aggressive measures to restore its power, dignity and influence in a region it considers its strategic back yard, foreign policy experts said.

Russia's emerging aggressiveness is now also timed with America's preoccupation with Iraq and Afghanistan, and the looming confrontation with Iran. These counterbalancing considerations mean that Moscow is in the driver's seat, administration officials acknowledged.

"We've placed ourselves in a position that globally we don't have the wherewithal to do anything," Mr. Friedman of Stratfor said. "One would think under those circumstances, we'd shut up."

One senior administration official, when told of that quote, laughed. "Well, maybe we're learning to shut up now," he said. He asked that his name not be used because he was not authorized to speak publicly on the issue.

The streets, largely empty of civilians, were full of Georgian military reservists idling in the shadows of shuttered shops as they waited to move out and join the fight against Russian forces that have bombed the city twice in as many days.

Among them were latter-day Rambos in bandannas and middle-age men with potbellies and red faces... Georgia said a Russian air raid had "completely devastated" the Black Sea port of Poti in attacks that the country's UN ambassador likened to "a full-scale military invasion". ...ONLY one thing is clear about the fighting that has broken out in Georgia and that is that it is madness

Russian military vehicles line the road to the South Ossetia area of Georgia.

The official was not authorized to speak on the record due to the sensitive nature of the diplomacy.||Georgia||South+Ossetia+Conflict

MOSCOW (Reuters) - The commander of the Russian troops sent to help separatists in Georgia's breakaway region of South Ossetia was wounded in an exchange of fire with Georgian forces on Saturday, Russian state television reported.

Lt. General Anatoly Khrulyov was wounded when a column of armored vehicles of his 58th army came under fire by Georgian forces outside the rebel capital of Tskhinvali, Vesti-24 channel said in a report early on Sunday.

Saturday, August 9, 2008

Georgian conflict affects oil,-Georgia-clash/ BP PLC, already acknowledging a loss of significant throughput along the Baku-Tiblisi-Ceyhan oil pipeline, appears to be facing wider problems in the Caucasus region after the Russian government sent troops and bombarded locations in Georgia.

The Russian incursion came Aug. 8 after Georgia earlier launched a major military offensive to retake the breakaway province of South Ossetia, threatening to ignite a broader conflict.

Analysis: energy pipeline that supplies West threatened by war Georgia conflict ... ... All of this begs the question where the United States are. After all, Georgia is a staunch US ally and Russia the old Cold War enemy.

Israel backs Georgia in Caspian Oil Pipeline Battle with Russia

DEBKAfile Exclusive Report

August 8, 2008

Georgian tanks and infantry, aided by Israeli military advisers, captured the capital of breakaway South Ossetia, Tskhinvali, early Friday, Aug. 8, bringing the Georgian-Russian conflict over the province to a military climax.

Russian prime minister Vladimir Putin threatened a "military response."

Former Soviet Georgia called up its military reserves after Russian warplanes bombed its new positions in the renegade province.

In Moscow's first response to the fall of Tskhinvali, president Dimitry Medvedev ordered the Russian army to prepare for a national emergency after calling the UN Security Council into emergency session early Friday.

Reinforcements were rushed to the Russian "peacekeeping force" present in the region to support the separatists.

Georgian tanks entered the capital after heavy overnight heavy aerial strikes, in which dozens of people were killed.

Lado Gurgenidze, Georgia's prime minister, said on Friday that Georgia will continue its military operation in South Ossetia until a "durable peace" is reached. "As soon as a durable peace takes hold we need to move forward with dialogue and peaceful negotiations."

DEBKAfile's geopolitical experts note that on the surface level, the Russians are backing the separatists of S. Ossetia and neighboring Abkhazia as payback for the strengthening of American influence in tiny Georgia and its 4.5 million inhabitants. However, more immediately, the conflict has been sparked by the race for control over the pipelines carrying oil and gas out of the Caspian region.

The Russians may just bear with the pro-US Georgian president Mikhail Saakashvili's ambition to bring his country into NATO. But they draw a heavy line against his plans and those of Western oil companies, including Israeli firms, to route the oil routes from Azerbaijan and the gas lines from Turkmenistan, which transit Georgia, through Turkey instead of hooking them up to Russian pipelines.

Saakashvili need only back away from this plan for Moscow to ditch the two provinces' revolt against Tbilisi. As long as he sticks to his guns, South Ossetia and Abkhazia will wage separatist wars.

DEBKAfile discloses Israel's interest in the conflict from its exclusive military sources:

Jerusalem owns a strong interest in Caspian oil and gas pipelines reach the Turkish terminal port of Ceyhan, rather than the Russian network. Intense negotiations are afoot between Israel Turkey, Georgia, Turkmenistan and Azarbaijan for pipelines to reach Turkey and thence to Israel's oil terminal at Ashkelon and on to its Red Sea port of Eilat. From there, supertankers can carry the gas and oil to the Far East through the Indian Ocean.

Aware of Moscow's sensitivity on the oil question, Israel offered Russia a stake in the project but was rejected.

Last year, the Georgian president commissioned from private Israeli security firms several hundred military advisers, estimated at up to 1,000, to train the Georgian armed forces in commando, air, sea, armored and artillery combat tactics. They also offer instruction on military intelligence and security for the central regime. Tbilisi also purchased weapons, intelligence and electronic warfare systems from Israel.

These advisers were undoubtedly deeply involved in the Georgian army's preparations to conquer the South Ossetian capital Friday.

In recent weeks, Moscow has repeatedly demanded that Jerusalem halt its military assistance to Georgia, finally threatening a crisis in bilateral relations. Israel responded by saying that the only assistance rendered Tbilisi was "defensive."

This has not gone down well in the Kremlin. Therefore, as the military crisis intensifies in South Ossetia, Moscow may be expected to punish Israel for its intervention.

Georgia is key EU energy corridor
Georgia is a key link in a U.S.-backed ``southern energy corridor'' that connects the Caspian Sea region with world markets, bypassing Russia. The BP Plc-led Baku-Tbilisi-Ceyhan oil pipeline to Turkey runs about 100 kilometers (60 miles) south of the South Ossetian capital, Tskhinvali.

The U.S. seeks to connect Central Asia natural gas supplies with European markets, skirting Russia in an attempt to weaken the grip of Russia's state-run OAO Gazprom energy company. One planned pipeline route runs from the Georgia-Turkey border.

The Trans-Caspian Gas Pipeline (Turkmen: Transhazar turbaly geçiriji) is a proposed submarine
pipeline between Türkmenbaşy in Turkmenistan, and Baku in Azerbaijan. By some proposals it will also include connection between Tengiz Field in Kazakhstan, and Türkmenbaşy. The aim of the Trans-Caspian Gas Pipeline project is the transportation of natural gas from Kazakhstan and Turkmenistan to central Europe, circumventing both Russia and Iran.

The Baku-Tbilisi-Ceyhan pipeline (sometimes abbreviated as BTC pipeline) is a crude oil pipeline that covers 1,768 kilometres (1,099 mi) from the Azeri-Chirag-Guneshli
oil field in the Caspian Sea to the Mediterranean Sea. It connects Baku, the capital of Azerbaijan; Tbilisi, the capital of Georgia; and Ceyhan, a port on the south-eastern Mediterranean coast of Turkey, hence its name. It is the second longest oil pipeline in the world after the Druzhba pipeline. The first oil that was pumped from the Baku end of the pipeline on May 10, 2005 reached Ceyhan on May 28, 2006.[1]

In 2007, the total throughput was 7.7 million tons and container handling was 185,000 TEU.[2]

In April 2008, Georgia sold a 51% stake of the Poti port area to the Investment Authority of the UAE's Ras Al Khaimah (RAK) emirate to develop a free economic zone (FEZ) in a 49-year management concession, and to manage a new port terminal. The creation of a new FEZ was officially inaugurated by the President of Georgia
Mikheil Saakashvili on April 15, 2008.[3]

Friday, August 8, 2008

Euro Falls the Most in 8 Years on Reduced Bets for Higher Rate

Euro Falls the Most in 8 Years on Reduced Bets for Higher Rate

By Ye Xie and Anchalee Worrachate

Aug. 8 (Bloomberg) -- The euro fell the most in almost eight years against the dollar as traders pared bets the European Central Bank will raise interest rates as the economy slows.

The euro is poised for its biggest weekly loss since January 2005 after ECB President Jean-Claude Trichet yesterday said economic growth will be ``particularly weak'' through the third quarter. An index that tracks the dollar against the currencies of six U.S. trading partners touched the highest since February. Crude oil fell to a three-month low.

``This is the beginning of a new chapter for the dollar as Trichet and other central banks are paying more attention to the downside risk to growth,'' said Dustin Reid, a senior currency strategist at ABN Amro Bank NV in Chicago. ``The decline of oil prices is a significant driver behind this dollar rally because it enables other central banks to turn their eyes away from inflation and focus on growth.''

The euro declined 1.95 percent to $1.5032 at 10:23 a.m. in New York and reached $1.5005, the lowest level since Feb. 27, from $1.5325 yesterday. It dropped as much as 2.08 percent, the biggest one-day drop since Sept. 6, 2000. Against the yen, the European currency traded at 165.84, from 167.70. The dollar rose 0.5 percent to 109.97 yen after touching 110.08, the strongest since Jan. 10.

Moving Average

The euro's decline below $1.53 and the break of the 200-day moving average at $1.5226 ``marks a significant change in sentiment for the dollar,'' pointing to a further decline to $1.46, Kevin Edgeley, a London-based technical analyst at Goldman Sachs Group Inc., wrote in a report today.

The euro has declined 3.1 percent against the dollar in its fourth weekly decline, the worst losing streak since May 2007. Against the yen, the U.S. currency has advanced 2.1 percent, heading for its biggest weekly gain in almost two months.

``The most important aspect of the dramatic collapse in the euro dollar is the absence of confirmation from other markets,'' said David Woo, global head of currency strategy at Barclays Capital Inc. in London. ``None of the typical drivers of the euro-dollar in the past couple of years could have accounted for the magnitude of this move, which leads one to conclude that this is a technical driven move.''

The South African rand led losses among the most-traded currencies as the prices of gold and platinum dropped, reducing prospects for export earnings from the country's biggest exports. The greenback rose to a six-month high against the Australian dollar, and advanced to the highest since September against the New Zealand dollar on speculation the central banks will cut borrowing costs.

Russia's Ruble

The Russian ruble fell by the most in 2 1/2 years against a dollar-euro basket used by the government after Georgia's Interior Ministry said four Russian fighter-jets entered Georgian airspace and bombed the towns of Gori and Kareli, boosting the risk of war. The ruble dropped as much as 0.8 percent against the basket.

The pound fell below $1.93 for the first time since March 2007 as the Bank of England kept its main interest rate steady at 5 percent yesterday after inflation accelerated and the economy teetered on the brink of a recession. It has dropped 2.7 percent this week to $1.9210, its biggest weekly drop in three years.

The Dollar Index on the ICE futures exchange reached 75.713 today, the highest since Feb. 21.

`No Bias'

Trichet said yesterday he has ``no bias'' or ``pre- commitment'' toward future rate movements after the central bank left the main refinancing rate at 4.25 percent. He told reporters in Frankfurt that while inflation remains a threat, risks to economic growth are ``materializing.''

European retail sales dropped by the most in at least 13 years in June, the European Union said on Aug. 5. Consumer confidence slid in July by the most since the Sept. 11, 2001, terrorist attacks, the European Commission said July 30.

Traders pared bets the ECB will lift rates a second time this year after increasing its main rate by a quarter-point last month. The implied yield on the December interest rate futures, an indication of expectations, retreated 2 basis pointsto 4.94 percent today.

The New Zealand dollar slumped as much as 2.2 percent to 69.84 U.S. cents, the biggest loss in two months. Australia's dollar dropped 1.7 percent, falling for a fourth day, to 89.10 U.S. cents, from 90.66 cents yesterday. The Reserve Bank of Australia said it may lower borrowing costs, after keeping its benchmark interest rate at a 12-year high of 7.25 percent this week.

Oil, Metals, Crops

Crude oil, metal and crop prices fell as the dollar climbed, reducing the appeal of commodities as a currency hedge. Oil has declined to $118.15 a barrel since touching the record of 147.27 on July 11.

The euro-dollar exchange rate and oil have had a correlation of 0.9 in the past year, according to Bloomberg calculations. A reading of 1 would mean they moved in lockstep.

``Oil prices have turned out to be much more supportive of the dollar than I expected,'' said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker. ``It does temporarily relieve some concern that the U.S. economy will weaken further. This is a plus for sentiment.''

To contact the reporters on this story: Ye Xie in New York at; Anchalee Worrachate in London at;

Last Updated: August 8, 2008 10:32 EDT