This paper tests the characteristics of oil-linked currencies to hedge the against changes in the price of oil from January 1998 through October 2018. The findings show that all four currencies tested (Canadian dollar, Mexican peso, Norwegian krone, and Russian ruble) are positively related to price changes in oil. While statistically significant, the nature of that relationship is not constant over time and is not consistent between all four currencies. Specifically, the linkage between oil-linked currencies and oil appears much greater in the last half of the sample compared with the first half. Also, the strength of the relationship is reduced during the most extreme price changes in the oil market.
Oil, foreign exchange, correlation, hedge, causality