The price of oil briefly touched $98 a barrel Wednesday while the dollar continued its decline and the Dow Jones Industrials fell two percent. VOA's Barry Wood reports one expert sees a direct relationship between the dollar's decline and the price of oil.
Ted Truman, researcher at Washington's Peterson Institute of International Economics, says the advance in the oil price is directly connected to the dollar's decline.
"Yes, because the true price of oil is in barrels, something per barrel, and the faster the dollar goes down the faster the dollar price of oil will go up," said Ted Truman. "That's the arithmetic."
Oil has long been priced in dollars. Its steady advance over the past two months has coincided with the dollar's equally steady decline against other major currencies. Truman was formerly the top international official at the US Federal Reserve and Treasury Department.
Some stock market analysts are also drawing a connection between the dollar's weakness and Wall Street. Carter Worth is the chief technical analyst at Oppenheimer brokerage in New York. He points out that foreign investors have trouble making money on Wall Street when their currencies are rising against the dollar.
"At some point, the dollar itself and its unrelenting weakness scare foreign buyers of financial assets in this country," said Carter Worth. "And that is the risk. They pull away from the bonds and the bond market. They pull away from financial assets. You can go and get excited about a US stock but you're going to lose all your money in the currency trade. It is increasingly worrisome."
Worth spoke on CNBC Television. The dollar traded at another record low Wednesday at $1.46 against the euro. It closed at $2.10 against the British pound.
Truman said he believes the US Treasury is remaining silent about the dollar's decline in large part because any statement in support of the currency probably would have little effect.
"I'm sure that the Treasury Department would be more comfortable if the adjustments in these markets were not as volatile and as one way as they have been," he said.
In New York, the Dow Jones industrials index was down two percent Wednesday, losing 360 points to 13.300. Reflecting continuing trouble in the housing credit markets, financial institutions led the way lower.