Asian Journal of Management

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Dynamic Relationship between Crude Oil, Gold and Exchange Rates:The Case of India


Affiliations
1 Assistant Professor, Department of Management Studies, Christ University, Bangalore, Karnataka, India
2 Student, BBA, Department of Management Studies, Christ University, Bangalore, Karnataka, India
     

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Gold and Crude Oil are the most trading commodities in the international market. EURO, USD, JPY and GBP are the four most trading currencies available for the market participants to trade. There are many factors which determine the changes in the Exchange rates. Similarly, change in the Gold prices and Crude Oil prices might impact the changes in the determination of Exchange rates. The study considered US Crude Oil (WTI- West Texas Intermediate) Prices,IB Oil(Indian Crude Basket)and Gold prices to assess the relationship. The study used Multiple Linear Regression Analysis and Granger causality test to analyze the relationship between gold, crude oil and exchange rates. The study found that only gold returns has positive impact on EURO/INR returns. Further granger causality test results revealsuni directional causality from Euro returns to Gold returns, Gold returns to JPY returns, IB Oil returns to JPY Returns and IB Oil returns to USD returns. The market participants are suggested to consider the effect of gold returns and IB Oil performance to take investment or trading decision in forex market (JPY/INR, USD/INR and EURO/INR exchange rates).

Keywords

International Market, Multiple Regression Analysis, Granger Causality Test and Indian Crude Basket.
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  • Dynamic Relationship between Crude Oil, Gold and Exchange Rates:The Case of India

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Authors

K. S. Manu
Assistant Professor, Department of Management Studies, Christ University, Bangalore, Karnataka, India
Harshita Agarwal
Student, BBA, Department of Management Studies, Christ University, Bangalore, Karnataka, India

Abstract


Gold and Crude Oil are the most trading commodities in the international market. EURO, USD, JPY and GBP are the four most trading currencies available for the market participants to trade. There are many factors which determine the changes in the Exchange rates. Similarly, change in the Gold prices and Crude Oil prices might impact the changes in the determination of Exchange rates. The study considered US Crude Oil (WTI- West Texas Intermediate) Prices,IB Oil(Indian Crude Basket)and Gold prices to assess the relationship. The study used Multiple Linear Regression Analysis and Granger causality test to analyze the relationship between gold, crude oil and exchange rates. The study found that only gold returns has positive impact on EURO/INR returns. Further granger causality test results revealsuni directional causality from Euro returns to Gold returns, Gold returns to JPY returns, IB Oil returns to JPY Returns and IB Oil returns to USD returns. The market participants are suggested to consider the effect of gold returns and IB Oil performance to take investment or trading decision in forex market (JPY/INR, USD/INR and EURO/INR exchange rates).

Keywords


International Market, Multiple Regression Analysis, Granger Causality Test and Indian Crude Basket.

References