USD Rises Versus Majors as Oil Rebounds

The dollar edged higher against its main rivals Tuesday as crude oil prices rebounded, modestly diminishing investors’ appetite for haven currencies like the Japanese yen and the euro.

The dollar  rose to ¥118.5430 from ¥118.30 late Monday in New York. The euro  weakened to $1.0826, from $1.0854 late Monday.

The ICE U.S. Dollar index , a measure of the dollar’s strength against a basket of six rival currencies, was flat at 99.3670.

Global stock markets broke with the familiar trading pattern that has emerged in recent weeks, as European  and U.S. shares  rose despite a 6.5% slide in the Shanghai Composite to a 13-month low.

Oil remains the primary driver in equity and currency markets, said Jane Foley, senior currency strategist at Rabobank. The commodity has become the primary arbiter of risk sentiment in a market that tends to lump assets into one of two categories — risk-on or risk-off. Risk-on assets like stocks rise when oil does, while risk-off assets like bonds rise when oil falls.

This correlation with oil prices could led to intense volatility in financial markets this year, Foley said.

“This could certainly be a volatile year for many currencies. Certainly for the first half of the year,” she said.

Crude-oil futures traded back above $30 a barrel after sliding on Monday. Brent crude  , the international benchmark, traded at $30.91 a barrel, up 1.3% on the day, and off a low of $29.27 earlier in the day. West Texas Intermediate crude, the U.S. benchmark , rose 0.7% to $30.56 a barrel, after earlier trading as low as $29.25.

via Marketwatch

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza