The dollar fell Tuesday towards year lows against the euro and the yen after a report that Arab states and other countries were contemplating an end to the U.S. currency’s role in the pricing oil.

By early afternoon London time, the dollar was down 0.5 percent at 89 yen, while the euro was up by 0.6 percent to $1.4729.

Further sustained falls could see the dollar fall below its multi-year low of 87.11 yen, and the euro break above its two-year high of $1.4842, achieved last month.

The selling was stoked by an article in Britain’s “Independent” newspaper from respected journalist Robert Fisk.

Citing unnamed Gulf Arab and Chinese banking sources in Hong Kong, the article said ‘secret’ meetings were taking place between Arab states, China, Russia, Japan and France, to end dollar dealings for oil and moving instead to a basket of currencies, including the euro, the yen and the Chinese yuan.

Officials in several countries either denied talks or said they had no knowledge.

Kuwait’s oil minister, Sheik Ahmed Al Abdullah Al Sabah, said there have been no talks on the topic among Gulf oil ministers. “At our level, no,” he said. “I didn’t even dream about it.”

Despite the denials, the report fed market skepticism about the U.S. currency in favor of the euro and the yen as the dollar’s future as the world’s reserve currency continues to be openly discussed.

Last week, figures from the International Monetary Fund showed that the dollar’s share of total reserves has fallen to its lowest level since 1995. Meanwhile, Robert Zoellick, a former U.S. trade representative who now heads the World Bank, warned that the currency’s status as the world’s leading reserve currency should not be taken for granted.

“Some stories will run and run and this morning’s report regarding a possible replacement of the dollar as the exchange currency for oil is another chapter in the plot against the dollar as the world’s most dominant reserve currency,” said Jane Foley, research director at Forex.com.

The worries are in part based on much larger U.S. budget deficits and expansive monetary policy at the Federal Reserve, including rock-bottom interest rates and expansion of the money supply. Those are all policies that can undermine a country’s currency.

The dollar’s role as a reserve and pricing currency supports its value because it obliges governments and companies to hold or obtain dollars.

Bank of New York Mellon currency strategist Neil Mellor said the notion that Gulf states may look to reduce their dependence on the dollar is “potentially very significant indeed,” particularly as they share the dilemma with China over the value of their dollar holdings. Any move that undermines the dollars’ value would reduce the value of those extensive holdings.

Over the last five years, the dollar has broadly fallen against many of its main competitors, leading to calls in dollar surplus countries, such as China and the Gulf states, for a greater diversification in their currency reserves.

As a result, talk of the dollar losing its price function is nothing new in 2003, Russia moved its ruble peg to a two-currency basket of the dollar and the euro. During the oil price boom in recent years, Russia built up big dollar reserves because of its status as one of the world’s major producers.

Dimitry Peskov, spokesman for Russian Prime Minister Vladimir Putin, dismissed the newspaper report as “not even serious” but did reiterate Russia’s recent policy of multiplying the amount of reserve currencies “to ease the burden on a single world currency and save ourselves from another crisis.”

Meanwhile, China has taken stakes directly in energy and commodity producers in an attempt to diversify its dependence on the dollar.

Hans Redeker, global head of foreign exchange strategy at BNP Paribas, said Saudi Arabia, which has the biggest oil reserves, will be the key country when discussing which currencies oil should be factored in.

“What investors should not forget is that Saudi Arabia has an interest to keep the U.S. strong and involved in the region,” he said.

“Switching the dollar for a basket of currencies for commodity factoring would weaken the U.S. additionally, which would be against the interest of Saudi Arabia,” he added.

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