Oil prices surge to fresh two and a half year highs

Oil prices have surged to a two-and-a-half-year high on concerns about supply and a weaker dollar. Brent crude topped $126, while US crude was at $112.79.Other commodity prices were also boosted by the fall in the US currency, as a weaker dollar makes commodities cheaper for investors holding other currencies.

Gold hit a new record of $1473.40 an ounce, while silver went to $40.22 an ounce, its highest since 1980. With little prospect of an interest rate rise in the US any time soon, the dollar has fallen in recent weeks.

It stands at a 15-month low against a basket of currencies. In morning Friday trade, the pound and the euro rose further, to $1.6427 and $1.4422 respectively.Interest rates in the eurozone rose on Thursday, from 1% to 1.25%, with the UK expected to increase borrowing costs within the next few months.

Higher rates are used to combat inflation, which is being driven by rising commodity prices.

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