Moves by Middle East oil exporters and Russia to switch some revenue from dollars to euros lie behind the US currency's weakness, billionaire investor Mr George Soros said today.
Mr Soros told delegates to the Jeddah Economic Forum that the dollar's fall should help to lower the US current account and trade deficits, but warned that a fall beyond an undisclosed "tipping point" would severely disrupt markets.
The US current account deficit is more than 5 per cent of gross domestic product despite the currency's three-year slide.
But the dollar has staged a comeback recently, gaining about 3.6 per cent against the euro and 3 per cent versus the yen so far this year.
"The oil exporting countries' central banks . . . have been switching out of dollars mainly into euros and Russia also plays an important role in this. That is, I think, at the bottom of the current weakness of the dollar," Mr Soros said.
Mr Soros, dubbed "The Man who broke the Bank of England" for his role as a hedge fund manager in betting the pound would drop in 1992, said he was not predicting further falls in the value of the dollar.
But he linked its fate to the price of oil. "The higher the price of oil the more the dollars there are to be switched to euro (so) the strength of oil will reinforce the weakness of the dollar," he said.
"That is only one factor, but I think there is such a relationship."
US crude hit a record $55.67 a barrel late last year and prices remain close to $50 a barrel.