USD Driving crude - or crude driving USD?

Trading Discussion News and Economy
1

Hi, I don’t know if this question should’ve been ask in the beginners section, if so the administrators are more than welcome to move it.

Basically, I am not sure how to look at the USD/Crude correlation. If crude falls, this usually happens while the USD Strenghens. Crude is priced in USD (almost exclusively - can anybody mention any exceptions, btw?), so to me it would seem intuitive that the price of crude comes off because the USD becomes stronger - so 1 USD is simply “worth more oil”.

But can you make the argument the other way around also? I have heard people/traders say that they think that a “crude is going to go higher, and that is going to weaken the USD”. Is there any logical basis for this? Or are these traders simply not careful about looking at cause/effect relation (or what you call :confused:)

2

I think that sentiment was true to an extent this year up until a couple of months ago when the credit crisis started, in that movements in the USD pushed crude higher and lower, but now it’s all about de-leveraging (buying back low yielding currencies and selling assets), slowing global growth (less demand for oil).