The BRIC nations -- Brazil, Russia, India, China -- basically the powerhouses of the developing world, recently met to discuss, among other things, the possibility of forming an effort to move away from the dollar as the world's reserve currency.

Among options for consideration: a) a shift to another hard currency, b) a shift to a basket of currencies, and c) the possibility of the International Monetary Fund's special drawing rights unit of account serving as the new reserve currency.

What's the current, sexy trade by institutional investors? Buy oil, sell the dollar.

For market absolutists and conservative economists, this is an 'np' -- or nooo problem. Like oil? Knock yourself out, and buy away. Oil's sexiness, due to expected increases in oil demand as the U.S. and global economies recovery, is a major reason crude's price has increased about 100% in six months. Oil closed Wednesday up 56 cents to $71.01 per barrel.

PowerShares DB US Dollar Index Down (NYSE: UDN) is a rules-based index composed solely of short USDX futures contracts. The USDX futures contract is designed to replicate the performance of being short the U.S. dollar against the following currencies: euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. UDN closed at $26.69. UDN over all option implied volatility of 18 is below its 26-week average of 22, according to Track Data, suggesting decreasing price movement.

PowerShares Commodity Index volatility (NYSE: DBC) is a rules-based index composed of futures contract on six of the most heavily-traded and important physical commodities in the world: crude oil, heating oil, gold, aluminum, corn and wheat. DBC closed at $23.97. DBC over all option implied volatility is of 38 is below its 26-week average of 42, according to Track Data, suggesting decreasing price movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

A couple of months ago, I would have bet that oil would probably peak out this summer in the upper $60's, and possibly move back through the psychological $70 mark, but it is starting to look like I would have been wrong. We have yet to hit the heart of the high demand summer driving months, and oil is already poised to break through $70 a barrel.

When we looked at oil prices yesterday we mentioned that the first place you are going to feel the recent jump in price is going to be at the gas station. And today, you will be seeing another slight jump in price as the national average for a gallon of gasoline moved over a penny higher last night to a current national average of $2.525.

Oil prices are picking up right where they left off on Friday, gaining another $1.72 a barrel, up to $68.03. We noted last week that a big reason oil has been moving so high lately was increased in optimism in the overall American economy.

Two more indicators showed up today that have really got Wall Street betting on continued rising oil costs. The first is a weakening of the dollar, and the second would be signs that manufacturing is strengthening once more in China. Both of these indicators were major reasons why we saw oil spike to record levels last summer, and their emergence now could signal that oil could continue heading higher.

Everything is fine, right? I mean May was a great month, following a solid April - so we are out of the woods, right? Not so fast my friend, there are some hints that we could hit a second credit crisis. According to this article, some early warning signs of another global financial crisis include surging government bond yields, a slumping dollar, and the end of the bear market rally in the U.S.

The most worrisome possible signal is the heavy selling of U.S. dollar-denominated assets, which could "trigger a full-blown currency crisis and usher in surging inflation." This assertion means that we should be a bit concerned that the Treasury note yields' surged to six-month highs near 3.75% this week. This move indicates that investors may be concerned about the U.S. government borrowing requirements this year.

This post was written by Minyanville contributor James Kostohryz.

As per the trade I laid out yesterday, with today's durable goods orders number that was significantly better than expected, we might be looking at S&P 930 today rather than sub 900 if the market had not gotten blindsided by yesterday's sudden plunge in long bonds. That's what stops are for.

But let's put this in perspective: A 12-point drop between yesterday's high of around 913 and the current level of 901 is small potatoes relative to what is at stake here.

Yesterday S&P downgraded its outlook for the British economy to "negative" because government debt in the U.K. may equal 100% of GDP. The pound tumbled on the news.

Today the dollar followed suit and dropped to a five-month low, indicating just how fast these markets can move. The drop was blamed on yesterday's downgrade. The dollar fell 0.4% to $1.3941 against the euro, 0.1% against the pound to $1.5839 and 0.2% to Y94.17 against the yen. The dollar index, which is valued against a basket of currencies, dropped 0.2% to $80.349

This post was written by Minyanville contributor Lance Lewis

The consensus seems to be blowing off the G20 as a nonevent for the dollar, but then again the consensus didn't anticipate the Fed announcing that it would begin to monetize Treasury debt a couple weeks ago either. And it was that Fed decision that brought us to where we are today.

The U.S. dollar is getting hammered in world markets after the Federal Reserve announced plans to buy $300 billion in long-term U.S. Treasuries. When the Fed buys bonds, it creates more money and that money is pumped into the economy. More dollars have the effect of weakening a country's currency. This is what is causing the present sell off in the dollar.

For investors this creates a new dilemma. For the short term, there will be pressure on the dollar. Should you then bet on further weakness and sell short the U.S. currency? That might work. On the other hand, if the Fed is right and the U.S. economy recovers quicker than other world economies, the dollar would gain strength against other currencies. So then do you seize this opportunity and use the present dollar weakness as a chance to buy the U.S. dollar?

The FOMC will issue its statement tomorrow at the conclusion of its two-day meeting. With interest rates already at virtually zero, there's obviously not going to be any change in that department. However, I do believe there is a high probability that the Fed will follow the Bank of England's example and begin buying government bonds (i.e. – quantitative easing or "printing money") on top of the agency debt and MBS that it is already monetizing.

Chinese Premier Wen Jiabao's comments on Friday were blunt and pointed. In effect, the U.S. Treasury and the Federal Reserve absolutely must assure China on the safety of its investment in the United States. If we read between the lines, Mr. Wen told the U.S. that it must shore up its financial mess and that China will not stand for any more uncertainty in the U.S. banking sector.

The Chinese government is the largest holder of U.S. public debt. Officials in China are becoming increasingly concerned about the sharp increase in U.S. government spending. They worry it will lead to inflation and the collapse of the U.S. dollar.

U.S. stock markets appear to be in free-fall (at least short-term), the federal budget deficit will exceed $1 trillion for at least the next two years, and Congress will likely have to raise the national debt ceiling above $13 trillion -- all negative developments for the dollar.

So what does the greenback do Monday? Of course, it continues to rise -- strengthening about one-half cent versus the euro and more than 2 cents versus the British pound, to $1.2581 and $1.4034, respectively.