Exchange rates and its impact on crude oil market
DOI:
https://doi.org/10.54097/yzdc8g87Keywords:
Brent, Exchange rates, orthogonal impulse responses, vector autoregression (VAR), WTI.Abstract
This study examines the dynamic relationship between exchange rate fluctuations and crude oil returns using a vector autoregression (VAR) model and orthogonal impulse response functions. The study reveals that exchange rates have a significant impact on the returns of crude oil. Notably, AUD/USD and EUR/USD exchange rates show strong initial effects on WTI and Brent crude oil returns, respectively. The patterns suggest that exchange rates are a pivotal factor influencing oil prices, essential for investors and policymakers in oil-dependent economies. The findings highlight the necessity for robust economic strategies that account for the intricate link between exchange rates and crude oil markets.
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