Generally speaking, the dollar is negatively correlated with oil and commodities.
The following is an article I saved when I was studying, the relationship between dollars and commodities.
Money is the measure of commodity value. Commodity value increases, currency depreciates relatively, commodity value decreases, and currency appreciates relatively. As a global currency, the exchange rate of US dollar reflects the value of global commodity trade to some extent. At present, global commodity transactions are mainly denominated in US dollars, which accounts for about 65% of global foreign exchange reserves. The trend of US dollar exchange rate has an important influence on commodity trading market, futures market and the redistribution pattern of economic interests of various countries. Commodities such as gold, crude oil and metals are greatly affected by the fluctuation of the US dollar exchange rate. This paper mainly discusses the influence of exchange rate fluctuation of US dollar on commodity market and the relationship between US dollar and other commodity prices.
I. US dollar exchange rate and gold price
Gold is a currency reserve. Although the dollar actually played the role of gold in the past, gold still has a certain influence on monetary policy, which is a means to deal with inflation and a substitute for the dollar. The main role of gold in the market is to reserve currency and hedge tools. At present, the function of reserve currency has been weakened, and many countries in the European Union are selling gold, which has suppressed the rise of gold prices to some extent. On the other hand, gold has become a preventive asset to prevent the decline of dollar assets. Therefore, the price of gold should be negatively correlated with the exchange rate of the US dollar, which is also proved by the actual market trend.
The strength of the dollar is an important factor affecting the price of gold. There are three main reasons for this: first, the US dollar is recognized as a hard currency in the world, and the US dollar and gold are international reserve assets. The strength of the dollar weakens the position of gold as a reserve asset and a value-preserving function. Secondly, the GDP of the United States accounts for about 1/4 of the world GDP, and the total foreign trade ranks first in the world, which has a far-reaching impact on the world economy; The price of gold is obviously inversely proportional to the world economy. Third, the world gold market is generally priced in dollars. On the one hand, the depreciation of the dollar will inevitably lead to an increase in the price of gold. On the other hand, gold denominated in dollars will be cheaper for holders of other currencies, thus stimulating the demand for gold. At the end of the 20th century, when the price of gold reached a low point, people threw out gold in succession, which was closely related to the continuous growth of American economy 100 months and the strength of the US dollar. Therefore, the trend of the dollar and gold prices should change in the opposite direction. Not only gold, but also other precious metals, such as silver, have a great relationship with the US dollar. The price of silver has always been deeply related to gold, so that people use the ratio of gold to silver to express the price of silver. However, compared with gold, the price of silver has a deeper impact on market supply and demand. After 1998, the world silver price and gold price began to go their separate ways. But generally speaking, the price of silver is closely related to the price of gold and the exchange rate of the US dollar.
Since the collapse of the Bretton Woods system and the sharp depreciation of the US dollar in the 1970s, the world gold price has risen sharply, from $35 per ounce in 70 years to the highest level of 1980: $830 per ounce. Since then, the price of gold has remained relatively stable, fluctuating between $300 and $400. In the mid-1990s, the price of gold fell because of the good economic situation in the United States and the strong dollar. The chart below shows the trend of world gold price and US dollar index from 1992 to 2007.
The negative correlation between gold price and dollar index is obvious. Since gold is priced in dollars, the fall of the dollar means the rise of the price of gold, and the correlation coefficient is as high as -0.9. Since 200 1, the pattern of dollar depreciation has laid a continuous upward trend of gold price.
Second, the dollar exchange rate and crude oil price.
Crude oil is one of the most important physical commodities in the world today. As one of the most traded commodities in the world, the price of crude oil has been closely linked to the US dollar exchange rate, and its delivery and pricing are basically settled in US dollars, so the US dollar exchange rate will also have an impact on crude oil prices. The oil crisis in the 1970s was a sharp rise in the international oil price of the Organization of Petroleum Exporting Countries, accompanied by a sharp fall in the exchange rate of the US dollar. This reflects the decline in the value of the dollar as an oil pricing unit. As a strategic industrial product, crude oil is greatly influenced by the basic supply and demand relationship. The fluctuation of crude oil price is influenced by many factors, besides politics, economy, weather and other factors, the influence of US dollar exchange rate is also an important factor.
The relationship between crude oil and the dollar is different from that between gold and the dollar. The price of gold is influenced by the exchange rate of the US dollar. Crude oil price and dollar price are interactive. When the price of crude oil rises, the world economy will be affected, including the United States, the world's largest consumer of crude oil. Inflationary pressure brought by rising crude oil prices will bring depreciation pressure to the dollar, and the direct consequence of the depreciation of the dollar is that the price of crude oil denominated in dollars will also increase. Of course, on the other hand, falling oil prices are a good signal for the economy. People's confidence in the American economy will push up the exchange rate of the US dollar, which will lead to a further downward adjustment of oil prices. According to experts' estimation, the correlation coefficient between crude oil price and US dollar exchange rate is -0.7. In other words, high oil prices often appear at the same time as a weak dollar. A major manifestation of the current global economic imbalance is the twin deficits pattern in which the United States has a huge fiscal deficit and a current account deficit, and the US dollar has a sharp depreciation trend in the medium and long term. If the expectation of dollar depreciation cannot be eliminated, the pattern of high international crude oil prices will be expected to continue.
There is a negative correlation between the dollar and the price of crude oil, and this trend will become more obvious after 200 1. From 200 1 to 2007, the dollar index has been falling from 120 to around 80, with a drop of 30%. The price of crude oil has been rising from $20 to nearly $78, an increase of 290%. The rise in oil prices is closely related to the depreciation of the dollar. With the continued weakness of the US dollar, the international crude oil price is expected to hit a record high this summer.
Three. Us dollar exchange rate and CRB index
CRB index is based on a package of commodities launched by the Bureau of Commodity Research of the United States, which reflects the fluctuation of commodity prices in the United States and has indicative significance for the world commodity market. CRB index includes: CRB futures price index, CRB futures classification index and CRB spot price index, among which CRB futures price index has the greatest influence on the current futures market. The correlation coefficient between US dollar index and CRB is -0.578, which shows a reverse moderate correlation.
Since 200 1, the sharp depreciation of the US dollar has caused the global commodity futures prices to soar, and the "commodity bull market" has become spectacular. The weak exchange rate of US dollar has shaken the price of global commodity market. The long-term low interest rate policy in the world has caused the flood of liquidity of world monetary capital, which has led investors to invest a lot of money in the commodity market, and the global commodity market price, especially the raw material market price, has seen a dazzling rise. The overall weakening of the US dollar has been accompanied by both base metals and crude oil hitting new highs, precious metal gold hitting a new high in 25 years, and CRB index reflecting the changing trend of commodity prices also hitting a new high in 25 years.
From 200 1, 1 1 to May 2006, CRB basically completed its 55-month mid-cycle rising period. Combined with the mid-term upward trend of the commodity market since the end of 200 1, the commodity market has completely followed the mid-term downward trend of the US dollar index, and the market has made a normal response in this trend. In the price correction period after the surge, with the further decline of the US dollar, the CRB index is currently showing a rebound trend, which means that a new round of price adjustment cycle has begun. It is expected that the US dollar will hit a historical low in the third quarter of this year, and it is not entirely impossible for the CRB index to rise to test a new high.
Fourth, the depreciation of the dollar and the bull market of commodities.
Since 200 1, the global commodity market has ushered in a historic bull market. The tight supply situation brought by the rapid growth of consumption has laid a good foundation for the market to rise; At the same time, the liquidity of global monetary capital caused by the long-term low interest rate policy and the depreciation of the US dollar caused by the US "twin deficits" have become powerful boosters of this bull market. The exchange rate of the US dollar is one of the core factors that affect the world commodity prices. The prices of important strategic materials such as gold, crude oil and basic metals are closely related to the exchange rate of the US dollar. The rise in commodity prices and the weakening of the dollar complement each other. Generally speaking, in the 1970s, the Bretton Woods system disintegrated, the dollar standard changed into a multi-currency system, and the dollar tended to depreciate, while the prices of other commodities were rising. The big bull market in commodity market is an important manifestation of this trend. Especially in 2 1 century, the energy market, the gold and silver market, the metal market and the soft commodity market all experienced a surge of 100%-300%, which was much greater than the decline of the US dollar. To some extent, this shows the decline of people's confidence in the US dollar. This is due to the vacillation of the United States in the world economy and the emergence of the euro as a strong competitor. Since 200 1, the US dollar index, which reflects the exchange rate changes of the US dollar against major western currencies, has formed an obvious downward trend. The US dollar index dropped from 12 1.02 in early July 2006 to the lowest point of 80.60 in early July 2007, with a cumulative decline of 34%. In fact, the strong dollar policy has been replaced by the weak dollar. The depreciation of the dollar triggered a domino effect. This effect is as follows:
First, the direct effect. Only considering the depreciation of the dollar relative to other currencies, crude oil, gold and copper are basically priced in dollars, and the depreciation of the dollar itself directly leads to the price increase of these commodities. Regardless of other related factors, how much the dollar depreciates will increase the resource commodities.
Secondly, the process of dollar depreciation is actually the process of constantly transferring dollar assets to other assets. However, in the foreign exchange reserves of countries around the world, the US dollar exceeds 65%, the euro is close to 25%, and the Japanese yen is only 6%. Because the euro and the yen can't afford foreign exchange reserves, it will inevitably force the dollar to be diverted through various channels, which will lead the holders of the dollar to convert some dollars into other currencies or assets. There are two situations: first, the dollar flows directly to assets still priced in dollars, including financial assets and commodity assets, the former such as stock market and bonds. The US stock market has hit record highs recently, which shows the continuous inflow of US dollar assets. At the same time, it also leads to an increase in the proportion of assets within the scope of dollar assets transferred to physical assets, especially the substantial increase in funds transferred to the resource commodity market, thus pushing up the price of resource commodities. The second is to transfer the US dollar to other currencies other than the US dollar, such as the euro and the Japanese yen. However, due to the special status of the US dollar, neither the euro nor the Japanese yen has the strength to compete with the US dollar, which leads to fluctuations in the world financial market. After nearly 20 years of development, the Asian economy represented by China has accumulated a great deal of monetary wealth. The foreign exchange reserves of China and Japan have reached more than $2 trillion, and there are already $4 trillion in the world. In recent years, many commodities have risen sharply, especially crude oil, and oil-producing countries have accumulated a large amount of petrodollars. In order to preserve the value, some of these currencies are inevitably moving, bringing too much liquidity to the international financial market, and the dollar is constantly depreciating absolutely. When the dollar turns to other currencies, the world will inevitably enter the era of inflation.
Third, the currency depreciates absolutely. On the one hand, the depreciation of the US dollar causes inflation; on the other hand, due to the rapid growth of the global economy, it is usually accompanied by inflation. The combination of these two factors will inevitably lead to the rise of commodity prices. At the same time, because all countries in the world use paper money, global inflation is inevitable. Inflation helps to absorb the excessive investment of the US dollar, and also leads to a sharp rise in many commodities such as gold, crude oil, basic metals and agricultural products (2 1.90, 0.00, 0.00%). This is very similar to the situation in the 1970s. Therefore, global inflation is not only the result of the depreciation of the dollar, but also one of the reasons for the rise of many commodities such as gold. Only in this way can the financial attributes of gold, crude oil and basic metals be highlighted.
Fourth, the depreciation of the dollar itself will lead to the expectation that the market will continue to depreciate, and at the same time, the depreciation of the dollar will also bring inflation expectations. This expectation will make people's behavior self-strengthen, thus accelerating its depreciation process in a short time, which will also transfer more funds to the market of resource commodities such as gold, crude oil and basic metals. Undeniably, due to the psychological expectation, people's behavior in the financial market is excessive, so prices often go too far in the short term.
Verb (abbreviation of verb) The depreciation of the dollar is the general trend.
It should be emphasized that the depreciation of the US dollar is only a phenomenon, and the imbalance of international economic development is the essential reason. In fact, the international financial market is a market for wealth transfer and redistribution. The instability of geopolitical factors has led to a sharp rise in crude oil prices. At present, the world financial system is unstable, and the world monetary system is facing new major changes and is in a big shock trend. This is that the international monetary system is in the transitional period of the Spring and Autumn Period and the Warring States Period.
In the last century, the international monetary system experienced three major changes: the gold standard-the dollar standard (Bretton Woods system)-a super-strong monetary system (Jamaica system). At present, it is transitioning to a multi-strong monetary system. This huge capital flow led to a huge shock in the financial market. In fact, since the birth of the euro, central banks including emerging market economies have continuously increased their euro reserves, which has also played an extremely important role in changing the single strong position of the US dollar and promoting the balance of the international financial structure. The proportion of euro in global foreign exchange reserves is increasing year by year. At present, it accounts for about 25%, with a further upward trend. The increasing importance of the euro in global foreign exchange reserves is conducive to further weakening the hegemonic position of the dollar. China's foreign exchange reserves of over US$ 654.38 trillion and the sustained, rapid and healthy development of China's economy in the future will accelerate the appreciation of RMB, and eventually make RMB a member of the international reserve currency.
At present, the international monetary system is in a transitional period from the "Spring and Autumn Period" (the period when the US dollar dominated) to the "Warring States Period" (the period when many currencies became reserve currencies together). Different from the last time, the dollar is only decoupled from gold, but it is still in a dominant position. This time, the dominance of the US dollar is likely to be greatly weakened, so the degree to which the US dollar is replaced by other assets may be stronger and longer than last time.