Thursday , 25 July 2024

These 5 Currencies Track the Price of Copper, Iron Ore and/or Crude Oil (+2K Views)

Most people don’t realize is just how closely some currencies track certain commodities – specifically oil, copper and iron ore. Below are 5 world currencies that…[have significant correlation to such commodity prices].

The original article has been edited here by for length (…) and clarity ([ ])

This year, commodity prices have been under pressure from a strong U.S. dollar and trade war fears. This has made a huge dent in the balance sheet of many net exporters of resources, in turn weakening their currencies. However, commodities could be on the rebound and are flashing a massive buy signal.

1. Australian Dollar

Australia is the world’s top iron ore producer and exporter…[which] means that its income is very sensitive to price changes..

Australian Dollar Tracks Iron Ore Prices
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2. Canadian Dollar

The strong correlation between the Canadian dollar and oil prices is largely due to crude oil being the largest single contributor of foreign exchange to the nation. Canada is the 5th largest oil producer in the world and accounts for almost 11% of the nation’s exports – almost all of which [75%] is sent straight to the U.S. a per the requirements of the current North American Trade Agreement (NAFTA).

Canadian Dollar Tracks Oil Prices
click to enlarge

3. Russian Ruble

Compared to Canada and Australia, Russia’s export mix isn’t nearly as diversified: about half of its exports in terms of value are a combination of oil and natural gas. (Russia sits atop the third-largest oil reserves in the world and the number one natural gas reserves.) It should come as no surprise, then, that its currency is highly influenced by the price of crude. When oil fell in July 2014, so did the ruble. However, the ruble and crude decoupled in early 2018 when the U.S. imposed sanctions against the Eastern European country for its alleged meddling in the 2016 presidential election.

Russian Ruble Tracks Oil Prices
click to enlarge

4. Colombian Peso

The same story can be found in Colombia, where oil exports are responsible for about 20% of government revenue and 25% of total exports… As Venezuela’s economy falls further into disarray, Colombia has taken its place as the number five exporter of oil to the U.S. – one of the world’s biggest markets.

Colombian peso tracks oil prices
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5. Peruvian Sol

Copper is Peru’s most important mineral export by value, amounting to 24% of exports in 2016…It’s the second-largest producer after Chile. As such, the Peruvian sol has declined in tandem with the red metal.

Peruvian Sol Tracks Copper Prices
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