hehe.. quite obviously you meant AUD as "dollar". I personally...

hehe.. quite obviously you meant AUD as "dollar".

I personally relate "dollar" with USD.

Hmm... Oil prices v USD

Love these questions since you can state almost anything and probably won't be wrong all the time. haha....

My stance is that this trend has been around for a long time (albeit very weak coorelation)but only recently has been noticeable due to a lot of market irrationality and overshooting.

Firstly, I think the correlation of gold with USD is a stronger indication and possibly should be considered before any consideration of other commodities like oil.

To address the first issue, the oil prices increased due to 3 main factors:
1. Supply issues (gasoline inventory fall)
2. Geopolitical instability in Georgia
3. Market uncertainty in the financial market

Of the main issues, only 2 in my opinion would affect the US$ strength - #2 and #3.

Obviously, uncertainty in financial markets will lead to a drop in $USD as people decide to swap to hard commodity like gold and move away from the financial markets.

You could argue that TWI will drop as well as oil prices increase since oil is predominantly traded in US$. As the Oil prices increase, less people will wish to trade oil which leads to less demand for US$. I agree this statement can be argued in its obvious opposite manner which probably leads to a major contradiction in my statement.

I find myself going in to too much detail so I probably will leave it at this.

In summary, I would not use oil prices as a correlation to the US$ because the oil prices in many cases are due to uncertainty in other countries mainly oil shocks in countries like Namibia and the sort.

Oil prices are also heavily affected by political unrest in Asia/Africa so the move in oil price can be totally irrelevant to the US$ (assuming you ignore the TWI based on the oil price).

Hope my post helps and if I have stated anything wrong (shucks.. just reading my stupid post (and oversight) about gearing in the BNB thread makes me squirm) please correct me for the better good of HC's FOREX room.