Commodity Currency

A commodity currency is the currency of an economy whose exports are dominated by raw materials, so its exchange rate tends to track the prices of those exports. The Australian and New Zealand dollars, the Canadian dollar and the Norwegian krone are commonly grouped this way, alongside several emerging-market currencies. When commodity prices rise, export revenue and the terms of trade improve, which typically supports the currency; falling prices work the other way. Traders therefore treat oil, metals and agricultural benchmarks as fundamental inputs for these pairs, and usually check the correlation between a commodity currency and the relevant benchmark before assuming that two open positions are independent of each other.