What is a commodity currency?

A commodity currency is a currency that moves in a correlated step with the global price of primary commodities due to certain countries’ dependency on the export of raw materials for income. The commodities include minerals like copper, iron ore and coal, energy products such as oil and gas, precious metals, and dairy products like milk.

Which currency is correlated with commodity prices?

Other currencies are also impacted by commodity prices but have a weaker correlation than the above three, such as the Swiss franc and the Japanese yen —which tend to rise when commodity prices fall. Knowing which currency is correlated with what commodity can help traders understand and predict certain market movements.

What are examples of commodity currencies?

Examples include the Australian, Canadian, and New Zealand dollars as well as currencies of oil-producing nations. Investors trade commodity currencies, in part, to take advantage of commodity price fluctuations that drive these countries' exchange rates.