There are certain currencies out there that are generally thought to be related to the price of oil.
The Canadian Dollar (for obvious reasons) is one. When oil booms, things boom in Canada, and that’s good for the Loonie. The Aussie is usually seen as another one.
But in recent years, the REAL petro-currency has not been a major oil powerhouse, but… the euro.
Well there’s a decent theoretical reason for the euro to rise against the dollar when the price of oil rises. The ECB is famously (some might say infamously) inflation-sensitive. Thanks to its German heritage, ECB chiefs are inclined to hike rates at the first hint of inflation, even when the economy is weak (as it was when the ECB hiked rates in early 2008 and early 2011). Oil of course, is a major driver of inflation.
And because rate hikes tend to be bullish for a currency, it stands to reason that higher oil prices = more inclination to hike rates = euro bullishness.
There are other factors that push oil and the euro together, such as the fact that oil revenues in the Mideast often get recycled into purchases of European products, and the fact that because the US uses more oil per capita, the US trade deficit expands faster than the Euro-wide ones during an oil price rise.
And in fact it’s fairly simple to simple to make a chart like this, showing that over the last several years, oil and the euro moved mostly in tandem.
In this chart, the euro is red and oil is black.
But there’s a problem with a chart like this, which is that both oil and the euro are priced in US dollars, so it’s natural to see the pair moving similarly if only because they have the same denominator, which has its own dynamics. If the dollar collapses, then of course both oil and the euro are going to surge.
It turns out, that if you price oil in barrels of gold (arguably a kind of universal un-currency that takes the dollar out of the equation) and then compare THAT against the euro, the two align even more nicely.
Again, it’s not perfect (nothing is) but the euro very much moves along with oil, when priced in gold.
And not only does the euro move closely along with oil, but it does so better than your typical commodity currency.
So for example, once again we have oil priced in gold (black line) but now we’re comparing it o the Canadian dollar (blue line).
As you can see, since mid 2009, the two have drifted apart by quite a bit.
Now here’s oil priced in gold (black) vs. the Aussie dollar (green).
They move similarly, but the peak was much more muted, and they’ve also drifted apart.
So the bottom line is that if you’re looking for a currency that really approximates the price of oil, you don’t need to find a big “commodity country”. The euro will do just fine, provided it sticks around.