The dollar will extend its long-term recovery against the euro as the development of shale-gas deposits and an increase in oil production cut U.S. energy imports, according to UBS AG.
“The greenback is also likely to break its negative relationship with oil prices as the U.S. starts to lose its foreign-energy dependence,” Mansoor Mohi-uddin, chief currency strategist at UBS in Singapore, wrote in a research report received today.
The 120-day correlation coefficient between first-month U.S. crude futures and IntercontinentalExchange Inc.’s Dollar Index was minus 0.57 today, meaning that 57 percent of the move in oil can be accounted for by changes in the exchange rate of the U.S. currency. That compares to a record of 63 percent in November 2008 and a three-year low of 16 percent in April 2011.
The dollar depreciated 1 percent to $1.3266 per euro at 4:12 p.m. London time. That’s still 21 percent stronger since reaching a record-low $1.6038 in July 2008. The dollar has appreciated 2 percent against the euro in the past three months, according to data compiled by Bloomberg.
The euro gained today even after futures traders increased their bets that the 17-nation currency will decline against the dollar. The difference in the number of wagers by hedge funds and other large speculators on a drop in the euro compared with those on a gain was 148,641 on Feb. 14, compared with 140,593 a week earlier, according to the Washington-based Commodity Futures Trading Commission.
That’s the first increase since the five-day period ended Jan. 24, according to data compiled by Bloomberg.
“The shift in the U.S. energy outlook suggests the dollar’s long-term recovery against the euro that began in 2008 should continue,” Mohi-uddin wrote.