Does the U.S dollar have an effect on the price of oil?

This study aims at investigating the following: first, whether the U.S exchange rate has a negative effect on the price of crude oil or not; second, whether there is a unidirectional relationship or not that runs from the U.S dollar exchange rate to the price of crude oil by conducting a Granger causality test; third, verify whether there is a long- run relationship between our proposed variables by conducting a co-integrated test by using the Engle-Granger test. This study finds a significant negative bivariate relation between the price of crude oil and the U.S dollar exchange rate when using monthly data. Furthermore, when using the same annual values of the two variables, this study shows that change of U.S dollar exchange rate does Granger cause the change in the price of crude oil at 5% level of significance, however, the oil price does not Granger cause change in U.S exchange rate at 5% level of significance. Therefore, the existence of a one way (unidirectional) effect is realized at 5% level of significance, which runs from the U.S dollar exchange rate to the price of crude oil.