It is a currency of major oil-producing nations which tend to rise in value when prices of oil rise and fall when prices fall. In other words, the Petro currency appreciated when oil prices rise and depreciated when oil prices fall.
Major oil-producing nations such as Russia, Saudi Arabia, Canada, Norway and Mexico heavily rely on revenue generated from oil exports. Recently the United States of America has cracked out from top 5 in crude oil exports.
Petrocurrencies like the Canadian dollar, Colombian peso, Russian ruble, Norwegian krone and Brazilian real have noteworthy exposure to fluctuating oil prices. Sometimes the pound sterling is also considered as Petro currency as a result of North Sea oil exports.
The Dutch Guilder strengthened significantly in 1970 and was regarded as Petro currency due to large quantities of North Sea oil and natural gas exports. Still, the country became non-competitive on the international market due to the high cost of service exports and Dutch industrial. The currency pairs USD/RUB, USD/CAD, USD/NOK, USD/MXN, USD/BRL, USD/CLP usually rises when the oil price falls. This phenomenon is often referred to as Dutch diseases in economic literature.
Currencies of Saudi Arabia, Iraq, Iran, Venezuela and Nigeria also have a secure link to fluctuating oil prices. Their currencies rise as oil prices rise, and currency value falls when the price drops.
World most dominant currency the United States dollar has been the significant currency for trading oil in the international market. In August 2018, Venezuela linked the group of nations who permitted their oil to be purchased in currencies other than the United States dollar, thus letting purchases in Yuan, Euros, and other exchangeable currencies. Iran also permits oil trading in different currencies.
In 2016, the major oil-producing nations such as Saudi Arabia, Russia, Nigeria, Azerbaijan and Venezuela had been adversely affected by low oil prices. The People’s Republic of China opened as futures market dominated in yuan in March 2018, which could cheer the use of its currency as Petro currency.