Exchange rates and its impact on crude oil market

This study examines the dynamic relationship between exchange rate fluctuations and crude oil returns using a vector autoregression (VAR) model and orthogonal impulse response functions. The study reveals that exchange rates have a significant impact on the returns of crude oil. Notably, AUD/USD and EUR/USD exchange rates show strong initial effects on WTI and Brent crude oil returns, respectively. The patterns suggest that exchange rates are a pivotal factor influencing oil prices, essential for investors and policymakers in oil-dependent economies. The findings highlight the necessity for robust economic strategies that account for the intricate link between exchange rates and crude oil markets.