The US Dollar Index appreciated 0.67% to 90.37 on March 20, 2018. The US Dollar Index is near a three-week high ahead of the Fed’s meeting. US crude oil prices increased 2.2% on March 20, 2018. A strong dollar could have limited the upside for oil prices during the same period.
The ProShares Ultra Bloomberg Crude Oil ETF (UCO) rose 4.1% to 26.3 on March 20, 2018. UCO targets to provide twice the daily return of an index of WTI crude futures contracts. The PowerShares DB Oil Fund (DBO) rose 1.4% to 10.8 on March 20, 2018. DBO follows the performance of the DBIQ Optimum Yield Crude Oil Index Excess Return.
US dollar’s highs and lows
The US dollar reached 88.25 on February 16, 2018—the lowest level since December 2014. WTI oil prices reached $61.68 per barrel on February 16, 2018.
The US dollar reached 103.8 on January 3, 2017—the highest level in the last 14 years. WTI oil prices reached $52.33 per barrel on January 3, 2017.
The Power Shares DB US Dollar Bullish ETF (UUP) tracks the US dollar’s performance. UUP rose 0.6% to 23.6 on March 20, 2018, while the US dollar rose 0.67% on the same day.
The US Dollar Index dropped ~9.8% in 2017, while US oil prices gained ~12.4% during the same period. The weak dollar partly supported oil prices. The US Dollar Index averaged 96.6 in 2017. A Reuters survey estimates that the US Dollar Index could end 2018 at ~88.7.
The Fed might increase US interest rates four times in 2018, which is bullish for the US dollar. However, the improving economy outside the US could see the US dollar lag compared to its peers. Major central banks could increase interest rates in 2018. The expectation of a weak dollar is bullish for oil prices in 2018.
Next, we’ll discuss China’s crude oil imports.