* G20 finance ministers meet in South Korea on currencies
* German Ifo sentiment index hits 3-1/2 yr high in Oct
* Coming up: U.S. weekly ECRI index at 1430 GMT
(Adds detail)
By Emma Farge
LONDON, Oct 22 (Reuters) - Oil prices rose above $81 a
barrel on Friday as positive German data and a dip in the dollar
index stoked buying for commodities ahead of a G20 finance
ministers' decision on currencies.
The G20 meeting in South Korea looked unlikely to reach a
deal on a U.S.-led initiative for a commitment from emerging
countries to allow their currencies to rise. []
The U.S. dollar index was volatile early on Friday and then
turned negative in a move that pushed the U.S. crude benchmark
up over $1 in intra-day trade as investors rushed to buy
alternatives to cash.
By 1335 GMT, U.S. crude futures <CLc1> were up 88 cents at
$81.44 a barrel, nearly reversing Thursday's drop of more than 2
percent. ICE Brent <LC0c1> rose $1.07 to $82.92 a barrel.
"The developing currency war and the devaluation war is the
single most important factor for the oil market besides maybe
the rate of Chinese economic growth," said Eugen Weinberg,
commodities analyst at Commerzbank adding, "the negative
correlation is sustainable in the longer term."
The dollar index has fallen around 7 percent from September
highs and stoked buying interest among both buyers holding other
currencies and investors looking for a commodities hedge.
Failure to reach a deal on currencies in South Korea could
weigh further on the dollar, analysts said.
Positive German data showing business sentiment was
strongest in 3-1/2 years in October also lifted oil prices on
Friday. []
"Today's Ifo underlines that the German good-news-show is
continuing and is more than just a rebound or a pure statistical
effect. The broadening of the recovery will continue," said
Carsten Brzeski, ING Financial Markets.
Refinery outages in France were supportive for the oil
complex on Friday with unions signalling their determination to
keep fighting even if President Nicolas Sarkozy's unpopular
pension reform becomes law on Friday. []
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Graphic on the correlation between oil and gold's
correlation to the dollar:
http://graphics.thomsonreuters.com/AS/0810/ABE_20102210125914.jpg Graphic showing oil's technical outlook:
http://graphics.thomsonreuters.com/WT/20102210072425.jpg
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STIMULUS MEASURES
A batch of U.S. data on Thursday pointed to slow-growth in
the world's top oil consumer, reinforcing views the Federal
Reserve will ease monetary policy further next month in an
attempt to jumpstart the economy.
New claims for jobless benefits dropped last week but
remained at levels suggesting little improvement in the
distressed labour market.
Other reports showed only a modest rise in a gauge of future
U.S. economic activity and a small gain in factory activity in
the country's Mid-Atlantic region.
"The general consensus is that more QE (quantitative easing)
will be approved, which, in turn, is expected to reduce
unemployment and boost demand," said Tamas Varga at oil broker
PVM.
Traders are expected to watch closely the result of the
weekly U.S. ECRI -- a leading economic index at 1430 GMT -- for
further clues about the pace of economic growth in the U.S.
(Additional reporting by Alejandro Barbajosa in Singapore;
editing by James Jukwey)
