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Oil & Currencies: Understanding Their Correlation

Oil & Currencies: Understanding Their Correlation

There is a hidden string that ties currencies together to crude oil, with price actions in one venue forcing a sympathetic or opposing reaction in the other. This correlation persists for many reasons, including resource distribution, the balance of trade (BOT), and market psychology. In addition, crude oil is quoted in U.S. dollars (USD) so each uptick and downtick generates immediate realignment between the greenback and numerous forex crosses.