Currencies in Europe will benefit from record oil prices because of the region's energy efficiency, exports to oil-producing nations and vigilance against inflation, according to Barclays Capital.
The euro, the British pound, the Swiss franc, the Swedish krona and the Norwegian krone should perform ``relatively well'' as oil prices rise, wrote David Woo, global head of foreign exchange strategy in London at the bank, the third-biggest currency trader. The U.S. dollar ranks bottom in terms of potential performance as energy prices climb, it said.
``Europe is well positioned in the new paradigm, the U.S. is not,'' Woo wrote in a research note dated May 23.
The dollar slid as much as 8.9 percent to a record low against the euro this year as losses from the subprime mortgage collapse threatened to send the U.S. economy into a recession. At the same time, oil futures have soared to a record as a crude producers sought higher dollar prices to compensate for lower import revenues, according to Barclays Capital.
This has created a ``vicious circle'' where high energy prices increase the U.S. trade deficit and make other central banks reluctant to lower interest rates, leading to further dollar declines, Barclays Capital said.
The euro bought $1.5757 at 5:23 p.m. in Tokyo, little changed from late in New York on May 23. It rose to $1.6019 on April 22, the highest since the common European currency's introduction in January 1999. The euro will rise to $1.59 in the next three months, according to Barclays Capital forecasts.
