Commodity Currencies
When oil, iron ore, or dairy prices move, certain currencies follow.
Researched and written by Laurent What Are Commodity Currencies?
Some countries' economies are heavily dependent on exporting raw materials. Their currencies move in correlation with the prices of those commodities because commodity exports drive a large share of national revenue, trade balance, and GDP.
The Big Three Commodity Currencies
AUD (Australian Dollar) - Iron Ore and China
Australia is the world's largest exporter of iron ore and a major exporter of coal and LNG. China is by far Australia's largest trading partner. When Chinese economic data is strong, demand for iron ore rises, Australia's export revenue rises, and AUD strengthens.
In practice: Chinese PMI data, iron ore futures, and Chinese GDP releases all move AUD. A strong Chinese economy = strong AUD. A Chinese slowdown = weak AUD.
CAD (Canadian Dollar) - Crude Oil
Canada is the world's fourth-largest oil producer. Oil exports are a massive component of Canada's economy. When WTI crude oil prices rise, CAD tends to strengthen. When oil falls, CAD weakens.
The correlation is not perfect (it's weakened somewhat in recent years), but on days with significant oil moves, you'll see CAD follow. USD/CAD falls (CAD strengthens) when oil rises.
NZD (New Zealand Dollar) - Dairy
New Zealand's economy is significantly driven by agriculture, particularly dairy exports. Fonterra's Global Dairy Trade (GDT) auction, held every two weeks, is the most important economic release for NZD. Rising dairy prices support NZD; falling dairy prices weaken it.
Other Commodity-Linked Currencies
| Currency | Commodity Link | Key Driver |
|---|---|---|
| NOK (Norwegian Krone) | North Sea oil | Oil prices, similar to CAD but smaller economy |
| RUB (Russian Ruble) | Oil and natural gas | Energy prices, but also heavily influenced by sanctions/geopolitics |
| ZAR (South African Rand) | Gold, platinum, mining | Precious metals prices, but also emerging market risk sentiment |
| BRL (Brazilian Real) | Soybeans, iron ore, oil | Diversified commodity basket, plus domestic politics |
Key Takeaways
- • AUD is linked to iron ore and coal prices (driven by Chinese demand).
- • CAD is linked to crude oil (WTI). Oil up = CAD up (usually).
- • NZD is linked to dairy prices (Fonterra, New Zealand's largest export).
- • Trading commodity currencies requires monitoring the underlying commodity, not just the chart.