Do higher oil prices lead to a weaker dollar?

or does a weaker dollar lead to higher oil prices?Do higher oil prices lead to a weaker dollar?
No. The weak dollar is caused by inflation. The inflation is caused by an increase in the money supply. The Federal Reserve inflates the money supply. As a result the oil prices increase in price to reflect the inflation caused by the Federal Reserve. As long as we have economic policy makers who insist on destroying our currency both in the government and at the FED we will not have stability in oil prices. Also the demand for oil is a factor as well. There are several forces at play here and the weak dollar is a major factor.





To understand why the weak dollar is causing oil to rise you must understand theat oil is priced in US Dollars. As the other currencies gain in value against the US Dollar or become stronger it take less currency like the Euro or Yen to buy the US Dollars needed for overseas countries to buy the oil they want. As a result the other countries are getting the oil at a discount because their currencies are stronger. So the price may go up for us but for other countries the price may stay flat or in fact decrease because their currencies are stronger. Its US citizens that are being hit with the largest percentage increase in the cost of oil.Do higher oil prices lead to a weaker dollar?
They work hand in hand.





If oil price is increased, in theory the same dollar yesterday doesn't hold the same value today.





In turn if the dollar is weaker, than the same dollar yesterday cannot purchase the same amount of oil today.





Also, keep in mind that if the governments budget has a cash windfall, then the government literally produces more monies. Actually gets the presses running to circulate more ';greenbacks';. Then this devalues the dollar because more is introduced into circulation.





Hope this answers your question.
The dollar is weak because the Federal Reserve may not increase interest rates, and may even lower them. As you know, interest rates is the price of borrowed money. If interest rates in the US were, let us say at 9%, and interest rates in London is 12%, where will you put your money?





To avail of the higher interest rates in that country, what do you do? You sell your dollars and buy cable, right? Selling pressure on the USD will weaken the dollar and strengthen the cable.





Oil prices is not directly a factor in the weakening of the dollar. Opec is trying to lessen supply. if you decrease supply while demand is rising, what happens?





and if the buying power of your money is going down, what happens still?
a weaker dollar causes higer oil prices because speculators use oil an a inflation hedge and a weaker dollar makes oil cheaper in other countries vs thier own currancies