(Reuters) By Barani Krishnan – A once-popular pair trade pitting the U.S. dollar against oil prices has re-emerged in recent weeks, injecting a new wildcard into the market just as the Organization of the Petroleum Exporting Countries prepares to meet. Through the second half of 2014, oil slid while the dollar rose, though market watchers viewed this inverse correlation as a coincidence. Oil’s rout was fueled by a swelling global glut, the dollar’s rise driven by European monetary easing and expectations of higher U.S. interest rates. In recent weeks, however, oil market analysts and traders said it looked as though foreign exchange markets were jerking oil prices around. Oil market players are now paying closer attention to currency markets than they have since the European financial crisis. About two weeks ago, Morgan Stanley analysts said an “uncanny” relationship has developed between the dollar index and benchmark Brent crude oil. The inverse correlation between the dollar and Brent is at its highest in three years. On Friday, crude prices fell 2 percent the day before the U.S. Memorial Day weekend. This summer should see heavy gasoline demand as the American Automobile Association expects a 10-year high in U.S. road travel. Still, oil … continue reading
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