Oil Prices Rally despite Strong Dollar

INA-sources
 
These are rocky times for most investments. The S&P 500 and Nasdaq have each fallen for seven consecutive weeks while the Dow Jones Industrial Average has fared even worse, dropping for eight weeks straight, the longest losing streak for the index since the Great Depression, in 1932. The S&P 500 is now down 13.9% in the year-to-date while Nasdaq has dropped 23.1%. Meanwhile, a 10% contraction in global bonds only looks tame when compared to Bitcoin's more than 30% decline in 2022.
 
But it has been a wonderful stretch for the dollar.
 
The U.S. Dollar Index, which pits the dollar against a basket of six global currencies, is hovering around 20-year highs. Since the beginning of the year, the dollar index has gained 8%; and in the last 12 months, it has risen 14%. The dollar index hit a two-decade high above 105 earlier this month and is currently trading less than 3% below those peaks. The dollar has performed even more spectacularly against single currencies: Against the Japanese yen, the dollar has appreciated more than 13% this year alone and gained 36.30% in 14-months against the sterling pound. 
 
What’s interesting is that the very forces that are responsible for unsettling the stock and bond markets, including Fed rate increases, sky-high inflation, global sanctions on Russia and China’s lockdowns, have actually been buoying the dollar thanks to its well-established status as a global safe haven.
But a brawny dollar has failed to stop one commodity in particular: crude oil.
 
The oil price bull run has been taking little notice of the greenback’s advance, and has managed to snap crude's historical inverse link to the dollar thus signaling it still has room to run based on current market fundamentals.
 
There's normally an inverse relationship between the value of the dollar and most commodity prices including oil. Historically, commodity prices have tended to drop when the dollar strengthens against other major currencies, and rise when the dollar weakens against other major currencies. Although the correlation is not perfect, there's often a significant inverse relationship over time between the dollar and commodity prices.
 
 
Source: Yahoo Finance