US blunders threaten to end dollar pricing of oil

NEW YORK – Oil-importing countries suffered an unprecedented double blow this year, as oil prices rose while other currencies depreciated against the US dollar. Not only do Asian and other emerging market currencies buy less in terms of US dollars, but oil costs more in terms of nominal dollars – nearly triple its local currency price of two years ago.

The double squeeze will put a tailwind behind Asian efforts to ditch the dollar as a trading currency. Asian central banks already have more than US$400 billion of local currency swap lines and can trade among themselves in their own currencies.