FX and Oil Correlation - Rabobank
We are all oil analysts now. This mantra has been stated time and time
again of late given the close relationship between oil and asset prices
across markets.
Key Quotes:
"Of course,
this theme is not new but the question of how long it will last remains
key. Many currencies have seen oil emerge as the biggest driver of price
action and for FX, the price of the black stuff is particularly
important for those countries who are key players in that space.
On
these pages we use a framework that should be familiar to regular
readers, namely looking at a wide range of currency pairs and their
correlation to moves in oil prices.
Of course, correlation does
not imply causation but for many currencies the relationship is
intuitively clear. Countries heavily reliant on oil production for
exports and revenues are of course more sensitive to shifts in oil
prices but so too are those who are heavy importers of oil with their
currencies showing a clear inverse relationship.
We have used
this framework before in the quest to examine just how broad-based FX
moves had become from a "risk-on, risk-off" perspective; we analysed
this in the past through the proxy of the global equities and the VIX
‘fear’ index."
