Oil Rises as Dollar Deflates After Yellen Dovish Comments

Oil futures edged up on Wednesday to near $40 per barrel as a weaker dollar spurred interest in riskier assets and the International Energy Agency said expectations for a deluge of oil from Iran were misplaced.

Brent futures LCOc1 climbed 71 cents to $39.85 a barrel as of 1340 GMT after settling down $1.13 in the previous session.

U.S. crude CLc1 rose 77 cents to $39.05 a barrel after ending Tuesday down $1.11.

The dollar index .DXY fell, after slipping to an eight-day low in the previous session on dovish comments by U.S. Fed Chair Janet Yellen about possible interest rate rises.

A weaker dollar makes greenback-denominated commodities cheaper for holders of other currencies.

“One of the main reasons for Yellen’s dovish stance is the low oil price and she made a direct reference to it,” said Olivier Jakob from Petromatrix consultancy.

“For Yellen, low oil prices are not only contributing to low inflation expectations but they are a threat to global economic growth due to the financial stress they are imposing on oil-producing economies,” Jakob said.

via Reuters

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, he established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza