Exploring dynamic connectedness between energy and the forex market during global double shock: a wavelet analysis

Purpose We delve into the dynamic connectedness between the energy and forex (FX) markets during the COVID-19 outbreak and the Russian–Ukraine invasion. Design/methodology/approach The price of crude oil is used to represent the energy market, while currency rates, specifically the US dollar (USD), the euro, the Japanese yen, the Pound sterling and the Australian dollar (AUD), are used to proxy the FX market. Cross-wavelet transformations (XWT) and wavelet coherence (WC) are deployed to investigate the dynamic relationships using daily data from investing.com as empirical support. Three distinct sub-samples of the data are separated: the whole period (December 31, 2019–June 17, 2022); the COVID-19 outbreak period and the Russo–Ukraine conflict period (February 24, 2022–June 17, 2022). Findings It is found that there is only a short-term correlation between crude oil prices and the USD during the early stages of COVID-19. Investors, portfolio managers and policy experts can be benefitted from the study’s conclusions. Originality/value The study is unique since it furnishes linkages among examined markets in two different periods, along with a whole period covering two major global economic shocks.