Why correlation of EURUSD and USDCHF is usually high?

Discussion in 'Trading' started by OddTrader, Nov 15, 2006.

  1. What are the fundamental factors and reasons for the highly inversely correlated association of EURUSD and USDCHF? Thanks.
  2. Daal


    My guess is they are the most bought currencies when people unload/load dollars(yen is probably more bought than chf though)
  3. It is nearly 100% due to the fact they trade the dollar inversely. Both of them being Euro-zone currencies helps contribute in a secondary way.
  4. Why is it negatively correlated, rather than positively, like GBP?
  5. That is incorrect.

    By that logic, the correlation of any pair of ---/USD and USD/--- should be nearly -100%. In fact, some of those correlations spend most of their time between 0 and -50%.

    The "inverse" aspect helps determine the sign of the correlation, not its degree.

    It's also not a fundamental factor, but merely an incidental quoting convention.
  6. Is this a serious question? I'm not an FX trader but I know the base currency is different for different pairs. Express everything in the same base and you'll see (e.g., look at CME FX futures where everything is expressed XXXUSD).
  7. If that is the case, why should they both have a value greater than 1, rather than one is 1+ (say 1.5) another should be less than 1 (say 0.67)?
  8. Thanks for the informative article.

    Can we make money by trading the spread of them, as they are so closely correlated for already a long long time? It would be so obvious Yes, if we understand the fundamental factors well enough.
  9. hcour

    hcour Guest

    Hi late apex,

    Could you explain further? Because I too thought the obvious answer was /USD vs USD/. According to the CSI correlation reports, the EUR & CHF (futures) are highly positively correlated to each other (90% or greater) and both are highly inversely correlated to the USD (90% or greater).

    Isn't the "quoting convention" that you refer to exactly what the respondent you quoted was referring to? If it was EUR/USD and CHF/USD, would they not be highly positively correlated? What am I missing in your explanation?

    #10     Nov 15, 2006