Study shows Canadian dollar appreciates 1.3 per cent when oil moves above $80
The Canadian dollar, Norwegian krone, and Russian ruble have been among the biggest beneficiaries of the sprint up in oil prices since August. The good news for investors betting on these currencies is that their sensitivity to the price of crude increases when oil trades between US $80 and US$100 per barrel.
The major crude exporters have shrugged off gains in the Bloomberg Dollar Spot Index, and their currencies have appreciated an average of 3 per cent versus the greenback since the 3-month Brent contract broke above US$70 per barrel.
Based on a Bloomberg study that controls for the effect of global stock prices and yields, the ruble appreciates by 2.3 per cent when Brent moves from US$80 to US$100 per barrel, compared with a 1.6 per cent gain when oil rose from US$69 to US$82. The sensitivity of the krone and Canadian dollar also increased, and the currencies appreciated by 2 per cent and 1.3 per cent, respectively, when oil moved in the higher range.
The results are surprising, given that Russia and Norway use their sovereign wealth funds and central bank interventions to curb currency appreciation when oil revenues are elevated. Furthermore, each marginal oil dollar spent onshore should have less of an impact on the real economy and on yields .