Goldman: Dollar strengthens as energy prices rise, equities decline

Goldman Sachs said the dollar strengthened as energy prices rose and equities sold off, with Brent at $103/barrel and European gas at EUR48/MWh pressuring energy importers. The Hungarian forint is seen as a relative beneficiary of Hungary's election outcome and a clearer path to EU fund disbursement, which could offset a roughly 1.3 percentage point deterioration in the net energy balance versus 2025. Goldman remains bearish on the Philippine peso, Thai baht and Indian rupee due to energy import exposure and weak external balances.

Analysis

The market is treating this as a terms-of-trade shock rather than a pure geopolitical risk event, which matters because FX tends to reprice slower than rates/energy. The near-term winners are structurally energy exporters and countries with cleaner external balances; the real loser set is a cluster of energy-importing, funding-dependent currencies where higher oil filters into both current account and inflation expectations. That creates a second-order tightening impulse for local central banks even before growth data visibly rolls over.

Hungary is the clearest idiosyncratic setup: the political reset improves the odds of EU transfers, and that fiscal backstop can dominate the oil bill over a 3-6 month horizon. In other words, the market may be underestimating how much external funding can offset a negative energy shock, making the forint one of the few emerging-market currencies where higher oil is not mechanically bearish if policy credibility improves fast enough. The trade is less about growth beta and more about the discount rate on sovereign risk premia compressing.

The more fragile expression is in South and Southeast Asia, where energy import dependence meets weak external buffers. Those currencies can stay under pressure for weeks even if headline risk fades, because the channel runs through reserves, import financing, and inflation pass-through. The key reversal risk is any de-escalation that knocks Brent back below the low-90s; that would likely unwind the strongest FX move first, while leaving policy credibility trades like HUF relatively intact.

The contrarian read is that this may be overowned as a "risk-off" move when the cleaner framework is relative inflation and external balance dispersion. That favors expressing the view in FX and rates more than via broad equity shorts, since a lot of global equities can digest $100 oil if the move is temporary, but currencies with weak external accounts often cannot. The best setup is to fade the weakest importers against the strongest commodity-linked or policy-improving currencies rather than betting on a generalized equity selloff.

Key Decisions for Investors

• Long HUF vs short INR or PHP for 1-3 months: favor HUF where EU-fund optionality can offset energy drag; use a 2-3% stop if oil shock reverses or EU negotiations stall.
• Short INR/CNH basket against USD for 2-6 weeks: cleaner expression of energy-import and current-account stress; target 3-5% downside in the basket if Brent stays above $95.
• Long NOK or CAD vs EUR for 1-2 months: terms-of-trade support should persist while Europe absorbs the energy shock; risk/reward is attractive if rates stay elevated and oil holds.
• Avoid broad equity bearishness; if hedging, use XLE calls funded by put spreads on EM FX proxies rather than index shorts, because the first-order winner is commodity-linked cash flow, not a market-wide collapse.