As the US Slowly Twists in the Wind

Venezuela, Oil Producers Buy More Euros as Dollar, Oil Slump
By Agnes Lovasz and Daniel Kruger

Dec. 18 (Bloomberg) -- Venezuelan leader Hugo Chavez is directing a growing share of the country's oil profits into euros as the dollar and crude prices fall.

The dollar, down 9.4 percent against the euro this year, may face more pressure in 2007 because Venezuela and oil producers from the United Arab Emirates to Indonesia plan to funnel more money into the single European currency.

"The U.S. dollar has suffered a long process of deterioration," Domingo Maza Zavala, one of seven board members at the central bank of Venezuela, said in a Dec. 14 interview. "The diversification strategy started this year."

Banco Central de Venezuela has slashed the percentage of its $35.9 billion worth of reserves invested in dollars and gold to 80 percent from 95 percent a year ago, said Maza Zavala. The country, the world's fifth-largest oil supplier, has boosted its euro holdings to 15 percent, from less than 5 percent in the same period.

The dollar has slumped against the European currency in 2006 as growth in the euro region outpaced the U.S. for the first time in five years. It rebounded 0.7 percent last week to finish at $1.308 against the euro. The U.S. currency is little changed versus the yen this year, closing on Dec. 15 at 118.17 yen.

Bank Indonesia is boosting euro holdings, said Senior Deputy Governor Miranda S Goeltom in a Dec. 13 interview in Jakarta. Indonesia has $39.9 billion in reserves. Sultan Bin Nasser al-Suwaidi, the governor of the Central Bank of the UAE, last month said he was considering when to shift as much as 8 percent of the nation's $24.9 billion in reserves into euros.

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