The Essence of Relationships between the Crude Oil Market and Foreign Currencies Market Based on a Study of Key Currencies

Marek Szturo, Bogdan Włodarczyk, Ireneusz Miciuła and Karolina Szturo
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Marek Szturo: Department of Finance, Faculty of Economic Sciences, University of Warmia and Mazury, 10-720 Olsztyn, Poland
Bogdan Włodarczyk: Department of Finance, Faculty of Economic Sciences, University of Warmia and Mazury, 10-720 Olsztyn, Poland
Ireneusz Miciuła: Department of Sustainable Finance and Capital Markets, Institute of Economics and Finance, University of Szczecin, 70-453 Szczecin, Poland
Karolina Szturo: Department of Systems Engineering, Faculty of Technical Sciences, University of Warmia and Mazury, 10-720 Olsztyn, Poland

Energies, 2021, vol. 14, issue 23, 1-17

Abstract: Structural changes occurring in the crude oil market have stimulated the emergence of hypotheses suggesting that the relationship between prices of this raw material and the US dollar exchange rate can gradually become similar to that observed between oil prices and exchange rates of the currencies of the countries whose revenues from the export of this resource are a significant part of their current account balance. The purpose of this study was to determine and evaluate the time-varying dependence between oil prices and the exchange rate of the US dollar in the context of the same relationship for the Chinese, European, Japanese, Saudi, and Russian currencies. The results of our analyses implicate that a negative correlation between the variables in question grows stronger in time periods preceding global shocks and during thereof. The dominance of the USD in the crude oil market is reflected in similar characteristics of the correlations of the currencies of other countries, such as China, countries of the Euro area, or Japan. As for countries exporting crude oil, the situation varies. The results of our research suggest the lack of a stable relationships between prices of crude oil and currency exchange rates. It is also impossible to observe a long-term, unequivocal tendency of the currencies of oil exporting countries being positively correlated with oil prices. Russia was the closest to this situation. In Saudi Arabia, a positive correlation emerged during moments of crisis.

Keywords: crude oil; currencies; correlation; forecasting models; modeling the risk of energy commodities; global energy markets (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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