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On Oil-US Exchange Rate Volatility Relationships: an Intradaily Analysis

Author

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  • Fredj Jawadi

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique, LITEM - Laboratoire en Innovation, Technologies, Economie et Management (EA 7363) - UEVE - Université d'Évry-Val-d'Essonne - TEM - Télécom Ecole de Management)

  • Wael Louhichi
  • Hachmi Ben Ameur
  • Abdoulkarim Idi Cheffou

Abstract

The paper investigates the dynamics of oil price volatility by examining interactions between the oil market and the US USD/EUR exchange rate. To this end, we use recent intradaily data to measure realised volatility and to investigate the instantaneous intradaily linkages between different types and proxies of oil price and US$/euro volatilities. We specify the drivers of oil price volatility through a focus on extreme US$ exchange rate movements (intradaily jumps). Accordingly, we find a negative relationship between the US USD/EUR and oil returns, indicating that a US $ appreciation decreases oil price. Second, we note the presence of a volatility spillover from the US exchange market to the oil market. Interestingly, this spillover effect seems to occur through intradaily jumps in both markets.

Suggested Citation

  • Fredj Jawadi & Wael Louhichi & Hachmi Ben Ameur & Abdoulkarim Idi Cheffou, 2017. "On Oil-US Exchange Rate Volatility Relationships: an Intradaily Analysis," Working Papers hal-04141662, HAL.
    • Handle: RePEc:hal:wpaper:hal-04141662
    Note: View the original document on HAL open archive server: https://hal.science/hal-04141662
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