Assets and currencies

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Commodities and Currency Values Name Institutional Affiliation Date Commodities and Currency Values In the forex (foreign exchange) market, currency valuation depends on many factors such as interest rates, political conditions, supply and demand and the economic growth. In general, in countries that are more dependent on a primary domestic industry, there exists a stronger correlation between the industry's commodity prices and the value of the national currency. However, there exists no pre-determined formula for determining what commodity a given currency is correlated to and how strong the correlation is (Bowler, 2015). There has been a drop in the value of major commodities recently around the world i.e. oil, copper, steel, gold and gas. The weak value of these commodities, however, will affect the currency depending on whether the country is a major importer or major exporter. The weak value of commodities for implies that major exporters of these commodities will experience a drop in the value of their currencies. For example, the strength of the Canadian dollar has fallen due the fall in the prices of oil- Canada has the second largest oil reserve after Saudi Arabia. The case is the reverse for a country that must import all its oil to meet its energy needs like Japan. In the great recession, there was a general decline of the economy observed in world markets (Delpla, 2015). The recession had a lot of negative effects on the economy and the central banks are devising monetary policies and exchange rate policies to mitigate these effects. They are using the exchange rate policies to control the external value of the currency in relation to other

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