Canadian Dollar, Russian Rouble And Oil

Includes: FXC, OIL, RSX
by: Marc Chandler


The Canadian dollar and the Russian Rouble are an interesting pair. The former is the strongest and the latter is the weakest against USD over past six months.

They both move in the same direction as oil 95-96 days of the past 100.

In terms of returns, the Canadian dollar is more correlated to oil than is the rouble.

Over the past six months, the Canadian dollar has been the best performing of the major currencies against the US dollar. It has only lost about 8.3% against the greenback.

On the other hand, the Russian rouble is the worst performing of currency. Over the past six months it has lost almost 40% against the dollar.

This Great Graphic, composed on Bloomberg, shows how well the Canadian dollar (yellow line) and the Russian rouble (green line) tracks the price of oil (white line). The prices are not normalized or indexed so the optics might be misleading. We looked at the correlation between oil and these two currencies.

The first issue we looked at was simply direction. When oil prices were lower, what happened to the Canadian dollar and Russian rouble. Over the past 100 days oil prices and the Canadian dollar moved in the same direction almost 95 days. The Russian rouble moved in the same direction as oil prices in 96 of the past 100 sessions.

The second issue we looked at was the correlation of the returns. To do this, we conduct the correlations on the percentage change of the time series. The Russia rouble is very volatile this volatility weakens the correlation of returns. Over the past sixty sessions, the return of the rouble and oil is correlated by about 0.19. Over the past 100 sessions, it is fractionally lower.

In contrast, the returns of the Canadian dollar and oil have been significantly more correlated. Over the past 60 sessions, the correlation of returns is about 0.58, three times more than the rouble/oil correlation. If the sample period is lengthened to 100 sessions, the correlation slips to 046, which means more recently the correlation has increased rather than diminish.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.