A Strong Dollar Hurts Some Commodities More Than Others

The recent oil price crash coincided with a rally in the US dollar.However, the dollar has varying relationships with varying commodities.A blog post by Jodie Gunzberg, global head of commodities at S&P Dow Jones Indices, analyzes how different commodities are affected by a strong dollar. Gunzberg starts by noting:"A strongUS dollaris generally bad news for commodities since historically as the U.S dollar strengthens, goods priced in dollars become more expensive for other currencies."Gunzberg's post includes a chart showing the correlations between different commodity prices and the dollar over ten years. The year in which each individual commodity index was introduced is shown in parentheses:The correlation between two sets of values is a number between -1 and 1 that describes how strongly related the sets are to each other. Negative correlations mean that the values move in opposite directions: if one value goes up, the other goes down. The closer to 1 or -1 the correlation is, the stronger the relationship between the quantities; the closer to 0, the weaker the relationship.The five commodities with the strongest negative relationship to the dollar are all oil-based, with the two crude oil benchmarks coming in at the top. A rise in the dollar generally tends to correspond to a fall in these commodities. Meanwhile, livestock and sugar have much weaker relationships with the dollar.SEE ALSO:Here's Where You'll Find Gasoline For Under $2 A GallonJoin the conversation about this story
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