The Canadian dollar, Norwegian krone and Russian ruble have been among the biggest gainers of Sprint Up. oil prices since August. The good news for investors betting on these currencies is that their sensitivity to the price of crude increases when oil trades between $80 and $100 a barrel.
Major crude exporters cut gains in the Bloomberg dollar spot index, and their currencies appreciated an average of 3% versus the greenback as the 3-month Brent contract broke above $70 a barrel.
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Based on a Bloomberg study that controls for the impact of global stock prices and yields, the ruble appreciates by 2.3% when Brent moves from $80 to $100 a barrel, compared with a 1.6% gain when oil moves from $80 to $100 a barrel. Increases from 69 to $82. Sensitivity to the krone and the Canadian dollar also increased, and the currencies gained 2% and 1.3%, respectively, when oil moved higher.
The results are surprising, given that Russia and Norway use their sovereign wealth funds and central bank intervention to prevent currency appreciation when oil revenues rise. In addition, each marginal oil dollar spent on the coast should have little impact on the real economy and yields.
Nevertheless, the US oil balance has improved significantly since previous occasions when oil prices were in the $80-$100 range. This could offset the positive impact of oil prices on these currencies against the dollar – though not against non-dollar rivals. On top of this, the recent rally in oil prices has raised concerns about stagflation, and a major risk-averse shock will boost the dollar against all assets.
This story has been published without modification in text from a wire agency feed.
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