Petroleos de Venezuela to Convert Accounts Away From Dollars

(Bloomberg) — Venezuelan President Hugo Chavez instructed Petroleos de Venezuela SA, the state oil company, to convert its investment accounts from dollars to euros and Asian currencies to reduce risk.

The decision may help weaken the dollar as the Federal Reserve prepares to lower interest rates this week, said Philip Wee, an economist at DBS Bank Ltd. in Singapore. The currency has fallen against 14 of the 16 most-active over the past year, partly as governments signaled they may diversify their holdings away from the U.S., the world’s primary destination for reserves.


Venezuela moved some of its reserves into euros last year, along with other oil producers including the United Arab Emirates, Kuwait and Qatar. The $50 billion Qatar Investment Authority said Sept. 4 it was looking for options in Asia to counter a weak dollar. China is starting a fund to look for higher returns on some of its almost $1.4 trillion holdings.

“Central banks will be switching more of the dollar into other currencies,” said Wee, senior currency economist at DBS. “This should be another negative in a trend that’s already set in the interest-rate outlook” and the Fed may lower borrowing costs to 4.75 percent by year-end from 5.25 percent, he said.

Bloomberg