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Oil prices dropped 1.2% in New York on Monday as the dollar advanced against the euro after a top European Union official told Greece to meet its deficit target this year, Bloomberg.com reported. As of 11:05am Singapore time on Tuesday, crude oil for April delivery was at $78.80 a barrel, up 10 cents, in electronic trading on the New York Mercantile Exchange. The contract fell 96 cents to $78.70 on Monday. Futures were down 0.7% this year.

Last week, crude oil broke through the $80 a barrel but kept falling back as big hedge funds bet against the euro. The fiscal drama in Greece added burden against the euro even after U.S. Federal Reserve chairman Ben Bernanke disclosed that the U.S. would retain its low interest rate, Posterous.com reported. Fears on the Greek economy only pushed the euro down compared to the U.S. dollar, thus affecting crude prices.

Soros bets against the euro
Hedge fund billionaire George Soros, through his Soros Fund Management, recently said he believes the euro “may not survive.” A report by Independent.co.uk said that traders and other hedge funds, including Soros, have been accused of short selling the euro and bet nearly $8bn against the single currency.

Previously, Soros warned that the euro could fall apart even if the European Union forges a bailout deal for the bankrupt Greek economy. Soros was quoted as saying: “Makeshift assistance should be enough for Greece, but that leaves Spain, Italy, Portugal and Ireland. Together they constitute too large of a portion of euroland to be helped in this way.”

Hedge funds heavyweights conspiring against euro
Soros, together with a group of secretive Wall Street hedge fund bosses were believed to have met at an “ideas dinner” at a private townhouse in Manhattan on 8-Feb to “plot to cash in on the fall of the euro.” Soros Fund Management was represented at the dinner, during which guests discussed, among other things, the decline of the euro against the dollar, reports said. Hedge fund titan SAC Capital Advisors was also said to have attended. Subsequent reports indicated that big hedge funds had launched large bearish bets against the euro since last week that were, said WSJ.com on Friday, “reminiscent of the trading action at the height of the U.S. financial crisis in 2008.”

Euro plunged in value
On 25-Feb or two days after Soros made the warning, the euro hit a one-year low against the yen in Asian trading. A dealer at a major Tokyo bank told Marketwatch.com that hedge funds, retail and institutional players accelerated euro-selling for the Japanese currency as news said that Standard & Poor’s Rating Services had warned to it would downgrade Greece by one or two notches by March.

The euro traded at $1.51 in December, but has since fallen to $1.34.

However, the Royal Bank of Scotland Plc (RBS) expressed confidence on Monday that the euro would rise to $1.40 as European officials work on a rescue package for Greece, easing concern of “default and contagion.” Greg Gibbs, a currency strategist at RBS, said that the 16-nation currency is also poised to advance after futures traders placed a record amount of bets that it will weaken, paving the way for a reversal of sentiment.
Precy Dumlao.