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Oil at 2 1/2 year high on supply concerns

11 April 2011 No Comment

US crude oil futures topped $113 a barrel on Monday for the first time since September 2008 on supply concerns while the euro climbed on increasing expectations of a rate hike by the European Central Bank (ECB) in July.

Heavy fighting in Libya and a weakening dollar lent new impetus to a rally in oil markets with Brent crude hovering around the $127 mark, despite assurances of increased supplies from top oil exporter Saudi Arabia.

Stocks outside Japan including South Korea (KOSPI) were largely flat after posting hefty gains in the last three weeks as spiralling oil prices and a late sell-off in Wall Street made investors grow cautious ahead of the start of the busy earnings season.

‘The KOSPI is expected to take a breather after it rose for four straight weeks. Oil prices have climbed and corporate earnings forecasts have been revised downwards,’ Mr Kim Hak-kyun, an analyst at Daewoo Securities, said.

In currency markets, the euro rose to 15-month highs around $1.4488 , paving the way for a test of $1.4582, the Jan 2010 high, as expectations grew that the ECB would follow up April’s quarter point rate increase with another one in July.

While the euro’s gains have gathered steam from the March lows after ECB President Jean-Claude Trichet first hinted at an April rate hike, the yen and the dollar have floundered as the Federal Reserve and Bank of Japan are expected to keep interest rates near zero for an extended period of time.

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