Currency intervention pushes Brent to four-week low

LONDON: Brent oil fell to a four-week low on Thursday after Japan's intervention to stem the rise in the yen boosted the dollar and anxiety about the extent of Europe's debt crisis curbed any interest in riskier assets.

Brent recovered to trade 7 cents firmer at $113.30 by 0823 GMT, off a session low of $112.70, the weakest intraday price since July 6. US crude was 11 cents weaker at $91.82.

In coming days financial and commodities markets are likely to focus on the wider economic picture as European and US central bankers deliberate and a series of data provides clues on the pace of any recovery.

"It's all about macroeconomics for the next five days basically," said Olivier Jakob of Petromatrix.

He cited a European Central Bank rates decision, followed by US employment data on Thursday and Friday and a meeting of the US Federal Reserve next Tuesday.

Technical analysts, who predict the future price direction from chart movements, said the market was weak after the front-month contract dropped well below its 100-day moving average, a major support level.

"The market still looks quite jittery," said Serene Lim, oil analyst at ANZ. "There seems to be a lot of negative momentum for Brent and technically it looks very weak."

Oil fell more than $3 on Wednesday after US inventory data showed a rise in stocks and a year-on-year decline in gasoline demand. That added to evidence that expensive fuel and a weak economy have reduced consumption in the world's biggest oil user.

Demand is expected to remain subdued as economies on both sides of the Atlantic battle against mountains of debt.

Concerns about the US and European economies have driven investors into safer havens, which has sent gold to a series of records and boosted the Japanese and Swiss currencies.

Japan sold one trillion yen ($12.6 billion) and its central bank eased monetary policy on Thursday, a day after Switzerland announced a surprise cut in interest rates in an effort to tame currencies driven by safe-haven demand.

In response, the dollar has firmed against a basket of currencies although analysts have said the impact could be short-lived.

Theoretically, a weak dollar spurs buying in dollar-denominated commodities, which become cheaper for non-dollar investors.

The weakness of the US economy and its implications for commodity demand could, however, be a bigger factor for oil markets than any further decline in the dollar.

Should the dollar maintain its current rally, though, that could be a further bearish factor for traders already factoring in subdued consumption.

Copyright Reuters, 2011