Yahoo Finance How Is the Dollar Index’s Recent Surge Impacting Natural Gas?
What Factors Are Currently Affecting the Natural Gas Market?
Natural gas and the US Dollar Index
In the last six trading sessions, natural gas (UNG) (DGAZ) (BOIL) (GASL) (FCG) fell by ~0.45%, while the US Dollar Index (UUP) (USDU) rose by ~0.3%.
In the five trading sessions ended on May 25, 2016, natural gas futures and the US Dollar Index moved in opposite directions in three instances. Apart from the inventory and the weather, the rise in the US Dollar Index could be an important factor affecting the fall in natural gas prices.
Natural gas’s price movements
On May 2, 2016, the US Dollar Index closed at $92.62—its lowest level to date in 2016. Between May 2 and May 25, the US Dollar Index rose by ~2.4%, while natural gas futures fell by 8%.
Between May 2 and May 25, in seven out of seventeen trading sessions ended on May 25, the US Dollar Index and natural gas moved in opposite directions based on their closing prices. However, this wasn’t enough evidence to point to an inverse relationship between the two. The relationship between crude oil and the dollar index is stronger.
The US Dollar Index cannot be held responsible for driving natural gas prices lower as of late. The above graph shows the price movements of natural gas futures and the US Dollar Index between May 2 and May 25, 2016.
Natural gas–weighted stocks
The above analysis is important for natural gas–weighted stocks such as Range Resources (RRC), Antero Resources (AR), Rex Energy (REXX), and Memorial Resource Development (MRD).
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