Exchange Rate Correlation to Commodities Exchange Rate Correlation to Commodities

Exchange Rate Correlation to Commodities

by
Australia is a huge producer of gold and it is clear to see why its currency would be highly correlated with the prices of this precious metal. However, the overall impact of gold on the Australian economy is not as large as the overall impact on the New Zealand economy when the purchasing power of Australia changes - for better or worse. In other words, falling gold prices may hurt Australia and its purchasing power - but not nearly as much as it hurts New Zealand to see its exports fall off when its wealthy neighbor ceases buying as many imports as before. Therefore, gold prices more dramatically influence currency rates in New Zealand, but in a far less direct manner than they do in Australia.
Source: http://www.investorguide.com/igu-article-961-forex-basics-can-commodities-affect-currency-rates.html