US Dollar Is near a 13-Month Low: What’s Next?
The US dollar hit 93.68 on July 21, 2017—the lowest level in 13 months. The US dollar has fallen more than 8% in 2017.
July 25 2017, Updated 12:36 p.m. ET
Crude oil futures
September WTI (West Texas Intermediate) crude oil (SCO) (BNO) (RYE) futures contracts rose 0.6% to $46.62 per barrel in electronic trade at 2:15 AM EST on July 25, 2017. Prices rose due to an expectation of a fall in Saudi Arabia’s crude oil exports in August 2017.
The rollercoaster ride in crude oil prices impacts oil producers like Apache (APA), Stone Energy (SGY), Noble Energy (NBL), and Goodrich Petroleum (GDP).
US Dollar Index
The US Dollar Index fell 1.3% to 93.68 on July 17–21, 2017—the lowest level in the last 13 months. President Trump’s inability to deliver tax subsidies and fiscal stimulus weighed on the US dollar. The PowerShares DB US Dollar Bullish ETF (UUP) tracks the US dollar’s performance. It also fell 1.2% to 24.3 on July 17–21, 2017. UUP has fallen 8% YTD.
However, the US dollar rose 0.15% to 93.82 on July 24, 2017. The US dollar rose due to better-than-expected US PMI (purchasing managers’ index) data.
The US PMI rose to 53.2 in July 2017 from 52 in June 2017—the highest level in four months. The rise in demand and improving labor market supported the rise in manufacturing activity.
US dollar and crude oil
Crude oil and the US dollar are inversely related. A weak dollar makes crude oil (XES) (IEZ) (RYE) more economical for oil importers. As a result, it supports crude oil prices.
US dollar’s high and low
The US dollar hit 93.68 on July 21, 2017—the lowest level in 13 months. The US dollar has fallen more than 8% in 2017. The US Dollar Index hit a high of 103.8—the highest level in 14 years—on January 3, 2017.
Fed meeting
The Fed’s two-day meeting will start on July 25, 2017. Market surveys don’t expect a rate hike in this meeting. So, the Fed’s meeting will likely have a marginal impact on the US dollar.
Impact
Expectations of a weak dollar in the short term could have a positive impact on crude oil (XES) (IEZ) (RYE) prices. Higher crude oil prices have a positive impact on oil producers like Stone Energy (SGY) and Goodrich Petroleum (GDP).
In the next part, we’ll discuss US crude oil inventories and US crude oil imports.