Stock Market · Currency, Commodity & GSec

Currency-commodity correlations

Certain currencies move in predictable patterns with commodity prices. Understanding these correlations helps you trade commodities through currencies, or vice versa.

Oil-linked currencies

• CAD (Canadian Dollar): Canada is a major oil exporter. Rising crude → stronger CAD.
• NOK (Norwegian Krone): Norway's sovereign wealth fund is oil-funded. Crude rises → NOK strengthens.
• RUB (Russian Ruble): oil and gas exports dominate Russia's budget. Crude crashes → Ruble collapses.

Gold-linked currencies

• AUD (Australian Dollar): Australia is a top gold (and iron ore) exporter. Gold up → AUD tends to strengthen.
• NZD (New Zealand Dollar): risk-on currency, moves with gold and commodity sentiment.

USD and commodities, the inverse relationship

Most commodities are priced in USD. When USD strengthens:

• Commodities become more expensive for non-USD buyers → demand falls → prices fall.
• Gold, crude, copper typically fall when the Dollar Index (DXY) rises.

> This creates a natural hedge: if you're long on commodities, a strengthening dollar is a headwind.

INR implications

• Strong USD → weak INR → costlier crude imports in INR terms even if crude in USD stays flat.
• India pays double for crude when USD strengthens AND crude prices rise simultaneously.

Monitoring DXY (US Dollar Index) alongside MCX commodity prices is essential for Indian commodity traders.

Takeaway. Commodities and currencies are tightly correlated. A rising USD typically depresses commodity prices (crude, gold, copper). Oil-producing nations' currencies (CAD, RUB, NOK) move with crude. India faces double impact when USD strengthens AND crude rises.