Any opinions on the fact, that Theheran has announced (quite some time ago) to launch an exchange for oil and gas trading end of march? The point is that they are going to trade in EURO, not US-Dollar.Any opinions on the implications for the US, if energy trading is set up the first time in big style not in $?Another helpful question on this topic is why ECU-states are still not trading their commodities in EUR.Cheers

QuoteOriginally posted by: earlyexerciseAny opinions on the implications for the US, if energy trading is set up the first time in big style not in $?It will be better for everyone, if they are reducing uncertainty by not pushing as much money through the currency markets.Like suppose you were saving gold. Then you heard aliens were engaging in space wars shooting gold at each other. It would create uncertainty as to the value of your holdings. Similarly, having foriegners sell oil for dollars, only to sell the dollars to other foreigners and buy euros, just makes valuations and flows and interest rates more uncertain, and complicates things for people denominating business in dollars.

Wouldn't it be dangerous for the US? If more and more commodity-exporting countries would sell for EUR, they necessarily would buy european govies (Bunds e.g.), not Treasuries any more. The US could be in trouble financing their deficit. Overall it would devalue the $, even if, to my knowledge, only 10% of curreny trading is for trade reasons. A weaker $ would mean higher costs when importing commodities or products. So it's not anything the US wants.Any opinions?

are there any Iranian quants on this forum? Who are?

I appreciate your humble opinion farmer, but to your points: (1) It does not have direct effect just b/c of Iran, but it could encourage other countries (Russia...) to trade vs EUR and this would have an indirect effect on bonds b/c(2) bonds are indeed not dollars, but the central banks of commodity exporting countries normaly invest their received $ in Treasuries => so trade in EUR could reduce demand for Treasuries and increase demand for Euro govies (3) If US wanted to buy commodities from a country trading in EUR it depends on the development of the exchange rate wether it's more expensive or not; the development of EUR/$ rate in the last years has dampened the effect of higher energy prices on EU b/c commodities were traded in $;in any case there is more uncertainty if you had to trade in another currency (4) my point here is: what are the central banks of commodity exporting countries going to do with the $ they already hold if they switch to EUR? I presume they would sell their $, the question is for what?

People love to read about movie stars. And what they want to read about them, is stories about how they crashed their cars or got into fights or went into drug rehab. So to sell tabloid magazines, writers crank out that stuff. Similarly, the United States is a star. And to generate news clicks, people like to write stories about how the dollar is drunk, or the dollar is on the skids and what not. But you can't get caught thinking that what people want to hear, and what is therefore written - that the US is doomed - has any correlation to reality.It does not have direct effect just b/c of Iran, but it could encourage other countries (Russia...) to trade vs EUR and this would have an indirect effect on bondsIf Russians want to buy European bonds, I'm sure they're not waiting for validation from the great business visionaries and thought leaders of Iran.bonds are indeed not dollars, but the central banks of commodity exporting countries normaly invest their received $ in Treasuries => so trade in EUR could reduce demand for Treasuries and increase demand for Euro goviesYour cause and effect is backwards. It is because they were going to sell dollars to buy euro govies, that they would just sell the oil for euros in the first place. They don't invest in treasuries because they are getting dollars, because someone flipped a coin 30 years ago. They get dollars because they want to buy things in dollars, or because they trust the dollar will be able to buy things. They aren't going to sell oil for euros, and then say because we have euros, we suddenly think maybe the euro has better price stability in the things we buy than the dollar. What you think isn't dictated by what you are holding, you don't like whatever you happen to be holding, that is backwards.If US wanted to buy commodities from a country trading in EUR it depends on the development of the exchange rate wether it's more expensive or not; the development of EUR/$ rate in the last years has dampened the effect of higher energy prices on EU b/c commodities were traded in $;in any case there is more uncertainty if you had to trade in another currencyOil being traded in dollars certainly did not stop oil from going up in dollars!my point here is: what are the central banks of commodity exporting countries going to do with the $ they already hold if they switch to EUR? I presume they would sell their $, the question is for what?Again, this is backwards. Why would they buy euros if they have more euros coming in? More likely they would switch to eur as part of a pattern that began with them selling more of the dollars they already had.

farmer: no one said they would buy EUR, they would buy euro govies...Anyway, to sum it up: The US has no interest to loose the $'s position as the key currency for oil etc.Feel free to draw your own conclusions from there.