Oil Prices and Currencies: Analysis
By Mark McCormick and Ilan Solot
NEW YORK ( BBH FX Strategy) -- In this piece, we look to analyze which currencies in the G10 are the most sensitive to oil prices and take a brief look at the policy implications following the roughly 12% increase in oil since early February.
First, it is important to note that while there are some differences between the correlation of WTI and Brent, for the most part, the correlations of both oil benchmarks are pretty tight on a short-term basis. Between the two, recent FX moves tend to be more closely related with moves in the WTI. But on a five-year horizon, currencies are more sensitive to changes in the Brent, perhaps due to the fact that Brent is more influenced by global factors.
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