Commodity Currency

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Commodity Currency

A currency with an exchange rate highly correlated to the price of a commodity that is important to the economy of the currency issuer. For example, the Canadian dollar tends to be strong when oil and soybean prices are high because these are two major commodities produced in Canada. Other commodity currencies include the Australian dollar and the New Zealand dollar.
References in periodicals archive ?
We also expect SSA inflation, on average, to fall back to the single digits, owing to more stable commodity currencies and improved food output in East Africa.
Commodity currencies are also enjoying a decent upside, after copper prices rallied to their highest level in almost four years.
Although the event didn't generate large volatility for the major five currencies, it happened to be a major episode for emerging market and commodity currencies as we continue to witness lately.
The most prominent theme in the world currency market in the past year has been the spectacular rise of the US dollar against the Euro, the Japanese yen, commodity currencies and above all, emerging markets.
This would translate to risks for more losses in the global markets, stretching as far as European equities, oil and commodity currencies.
In the final Asian trade commodity currencies nursed hefty losses on Friday as investors sent the Australian dollar to 5 1/2 year lows as they bet on the Australian central bank reducing interest rates when it meets this week.
The sharp decline in nearly all commodity prices and the weakening in commodity currencies creates headwinds for oil demand in the commodity producing emerging markets in Latin America and the Middle East.
The bearish Chinese data has added to worries about a 40 per cent slide in iron ore prices this year and further soured sentiment for commodity currencies.
These four currencies are generally known as commodity currencies.
However, investors are wary that a supply shock could hurt global recovery prospects and hit the less-liquid and riskier commodity currencies at first.
Of the three main EM commodity currencies (BRL, ZAR, RUB), RUB has better fundamentals.
The latest IMF reserves data shows that central banks allocations to the Euro have now fallen below 24 per cent at the expense of A commodity currencies such as the Norwegian kroner, Australian dollar and the Canadian dollar.

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