Dollar/oil correlation unlikely to return soon

NEW YORK (Reuters) – The break in the link between oil prices and the dollar seen for much of the past 18 months is unlikely to be reestablished soon.

Crude and the greenback, which historically had little to no direct trading relationship, began to show a strong negative correlation from 2007, when investors rushed into commodities as the dollar weakened.

Investors had sold the dollar as U.S. economic prospects dimmed and bought oil as a hedge against inflation and uncertainties in the supply of raw materials.

The relationship eased late last year as fundamental pressure from slumping demand and the slowdown of the overall economy pushed oil lower independent of the actions of the dollar, and analysts said the link might not return in the near term.

Reuters