Oil and the dollar no longer linked

February 5, 2009

oil_and_dollar

The correlation between oil prices and the dollar seen since the third quarter of 2007 has weakened. Investors had sold the dollar as U.S. economic prospects dimmed and bought oil as a hedge against inflation and uncertainties in the supply of raw materials. The relationship eased late last year as fundamental pressure from slumping demand and the slowdown of the overall economy pushed oil lower independent of the actions of the dollar, and analysts said the link might not return in the near term.

Comments

So long as oil is traded in dollars, and middle eastern currency is pegged to the dollar, the price of oil and the value of the dollar will remain linked, inversely or not.

 

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