By Sarah Turner, MarketWatch
SYDNEY (MarketWatch) — Oil futures extended its rally in electronic trade during Asian trading hours Thursday, as the dollar gave up some of its recent gains.
Benchmark Nymex light sweet crude-oil futures traded 35 cents higher at $101.67 a barrel by midday Thursday in Asia.
In regular trading in New York on Wednesday, oil for July delivery CLN11 +0.30% rose $1.73, or 1.7%, to reach the highest settlement level since May 10.
The gains for oil on Wednesday were made as the dollar retreated against major rivals.
Oil and the dollar generally move inversely to each other, with a lower dollar increasing the appeal of dollar-priced commodities and vice versa.
The dollar retreated in Asian trading hours Thursday, with the dollar index DXY -0.51% trading at 75.575, compared to 75.847 in late North American trading on Wednesday.
“The catalysts for the move were two separate reports highlighting China’s ongoing diversification of its reserves,” said currency strategists at RBC Capital Markets writing about the dollar.
The Financial Times newspaper reported late Wednesday that China is interested in buying Portuguese bailout bonds when the European Financial Stability Facility starts auctioning the securities next month. See more on China’s reported plans to buy Portuguese bonds.
“This was followed soon after by New Zealand domestic press reporting China Investment Corp. may have set aside up to 1.5% (or 6 billion New Zealand dollars) of its foreign-exchange reserves to invest in New Zealand assets, including government bonds, companies and potentially dairy farms. The same report noted China is also thought to have allocated 2% of its reserves to invest in Australia,” the RBC strategists said.
China is a major creditor of the U.S., and any sign it may buy fewer dollar-denominated Treasurys tends to hurt the greenback.
