Commodity currency

A commodity currency is a currency that co-moves with the world prices of primary commodity products, due to these countries' heavy dependency on the export of certain raw materials for income.[1] Commodity currencies are most prevalent in developing countries (eg. Burundi, Tanzania, Papua New Guinea). In the foreign exchange market, commodity currencies generally refer to the New Zealand dollar, Norwegian krone, South African rand, Brazilian real, Russian ruble and the Chilean peso.[citation needed] Commodity currencies' nature can allow foreign exchange traders to more accurately gauge a currency's value, and predict movements within markets based on the perceived value of the correlated commodity.

  1. ^ Chen, Yu-Chin; Rogoff, Kenneth; Rossi, Barbara (2010). "Can Exchange Rates Forecast Commodity Prices?". Quarterly Journal of Economics. 125 (3): 1145–1194. CiteSeerX 10.1.1.165.989. doi:10.1162/qjec.2010.125.3.1145.