The “buck” is in trouble.

The press is starting to carry stories that say that the falling U.S. Dollar has a smaller impact on inflation than it used to because of foreign exporters' willingness to adjust prices to hold onto U.S. market share. But tell that to anyone who in real life uses Dollars and you may get a totally different response. The tone remains essentially Dollar-negative and is likely to remain so as long as the Fed is perceived to be in an easing cycle. Low-yielding Yen and Swiss Francs were both benefiting as rising risk aversion saw investors trim back carry trades again, in which low-yielding currencies are sold to finance the purchase of riskier, higher-yielding assets elsewhere.

The Dollar fell to a twelve-year low against the Swiss Franc and lost ground against the Yen on Monday as fears over the health of the U.S. economy continued to undermine the currency.

Analysts said weak U.S. data on Friday had helped to cement expectations of further interest rate cuts from the Federal Reserve. The Dollar fell to a low against the Swiss Franc, its weakest level since 1995, before pulling back slightly.

News that ministers from OPEC would meet next month to discuss the impact of a falling Dollar and the merits of revaluing their currencies had ensured the Dollar began the week on the ropes.

Friction among oil-producing Gulf states, which peg their currencies to the Dollar, were heightened last weak as the United Arab Emirates said it had come to a “crossroads” over Dollar weakness and was considering ditching the Dirham’s Dollar peg in favor of a basket of currencies.

Expectations of a shift in Gulf States currency regimes were heightened on Monday as reports suggested that Saudi Arabia, which so far has rejected any change in the Riyal’s Dollar peg, might allow a one-off appreciation in its currency, but keep its peg to the Dollar. The speculation sent the Saudi Riyal up to its highest level since Saudi currency was pegged to the Dollar.

In Riyadh, Saudi Arabia, sky-high crude-oil prices are fueling an economic boom in Riyadh and in other oil capitals at the same time they are enflaming old divisions within OPEC and stirring fresh doubts about the future role of the world's premier oil-supply cartel. The threat here is also that crude-oil production could stall, setting the stage for a period marked by energy shortages and high prices. The oil czars of the 13-member group, who met for a rare heads-of-state summit in Riyadh over the weekend, have enjoyed an extraordinary run-up in crude prices over the past eight years that so far has done surprisingly little to blunt either the global economy's run of growth or its thirst for oil.

This report may include information garnered from the following sources: CBOT, Bloomberg, Reuters, Interactive Investor, Cattle Network, Earth Times, AgReport, Aol Money, CNN Money, Market Watch, The Forex Market, Yahoo Finance, FXsol, Financial Times, iWon, Report on Business, Crain’s, Dow Jones Newswire, Nasdaq News, INO News, The Hightower Report.

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