The US dollar (DX-Y.NYB) is currently caught in a tug-of-war between oil prices and the Federal Reserve, Rabobank senior FX strategist Jane Foley pointed out in a note to clients on Thursday.
It began when the dollar's old relationship with oil started breaking down.
Historically, crude oil (CL=F, BZ=F) and the greenback have moved in opposite directions. Oil is priced in dollars, so a stronger currency weighs on the commodity because it costs buyers more to purchase it.
That relationship began to shift in 2022, when Russia invaded Ukraine and the US cemented its position as a major energy exporter, Foley stated. That shift became more significant as the war in Iran disrupted shipping through the Strait of Hormuz.
Higher oil prices once represented an almost unambiguously negative shock for the US economy. But the war in Iran — which has triggered the largest energy supply crisis in history — has presented an opportunity for major US oil producers to ramp up production and take advantage of higher prices, bolstering the country's energy exports.
#higher #began #relationship
It began when the dollar's old relationship with oil started breaking down.
Historically, crude oil (CL=F, BZ=F) and the greenback have moved in opposite directions. Oil is priced in dollars, so a stronger currency weighs on the commodity because it costs buyers more to purchase it.
That relationship began to shift in 2022, when Russia invaded Ukraine and the US cemented its position as a major energy exporter, Foley stated. That shift became more significant as the war in Iran disrupted shipping through the Strait of Hormuz.
Higher oil prices once represented an almost unambiguously negative shock for the US economy. But the war in Iran — which has triggered the largest energy supply crisis in history — has presented an opportunity for major US oil producers to ramp up production and take advantage of higher prices, bolstering the country's energy exports.
#higher #began #relationship
2 months ago
