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Please note: The Frank Talk articles listed below contain historical material. The data provided was current at the time of publication. For current information regarding any of the funds mentioned in these presentations, please visit the appropriate fund performance page.

5 World Currencies That Are Closely Tied to Commodities

November 18, 2015

5 World Currencies That Are Closely Tied to Commodities

For more than a year now, commodity prices have been under pressure from the strong U.S. dollar and slowing global demand. This has made a huge dent in the balance sheet of many net exporters of resources, in turn weakening their currencies.

This should come as a shock to no one, but what most people don’t realize is just how closely some currencies track certain commodities. When I presented at the International Mining and Resources Conference in Melbourne, Australia, earlier this month, I shared several charts that show this correlation. Many attendees were astounded—and we’re talking professional economists, money managers and CEOs here.

With that said, I think it’s important that you see this correlation as well. Below are five world currencies that have been impacted by lower commodity prices.

1. Australian Dollar

Australia now accounts for around a third of global iron ore production, according to the country’s budgetary office. This means that its income is very sensitive to price changes. As demand from China, the world’s largest consumer of iron ore, has softened, so too has the Australian dollar.

Australian Dollar Tracks Iron Ore Prices
click to enlarge

2. Canadian Dollar

The sixth-largest oil producer in the world is Canada, about a quarter of whose exports is oil. The Conference Board of Canada, a not-for-profit economic research group, estimates that sales for the country’s energy sector will recede a sizable 22 percent this year. In Alberta, where revenue from oil sand exports had until recently helped the province become the fastest-growing in Canada, GDP is expected to contract 1 percent. And in September, the country’s economy shrank for the second straight quarter. As for the Canadian dollar, it’s fallen around 15 percent against the dollar for the one-year period.

Canadian Dollar Tracks Oil Prices
click to enlarge

3. Russian Ruble

Compared to Canada and Australia, Russia’s export mix isn’t nearly as diversified: About half of its exports in terms of value are a combination of oil and natural gas. (Russia sits atop the third-largest oil reserves in the world, the number one natural gas reserves.) It should come as no surprise, then, that its currency is highly influenced by Brent oil. Where oil went starting in July 2014, so went the ruble.

Russian Ruble Tracks Oil Prices
click to enlarge

4. Colombian Peso

The same story can be found in Colombia, where oil exports are responsible for about 20 percent of government revenue. Officials estimate, however, that oil sales will total $1.1 billion in 2016, compared to $6.7 billion in 2014. With prices lingering just above $41 per barrel, the Colombian peso has retreated 30 percent against the U.S. dollar for the one-year period.

Colombian Peso tracks Oil Prices
click to enlarge

5. Peruvian Sol

Besides gold, copper is Peru’s most important mineral export by value. With around 13 percent of the world’s copper reserves, it’s the third-largest producer after Chile and China. As such, the Peruvian sol has declined in tandem with the red metal.

The Peruvian Sol Tracks Copper Prices
click to enlarge


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All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.

Net Asset Value
as of 12/13/2017

Global Resources Fund PSPFX $5.93 0.07 Gold and Precious Metals Fund USERX $7.33 0.21 World Precious Minerals Fund UNWPX $5.64 0.13 China Region Fund USCOX $11.28 0.11 Emerging Europe Fund EUROX $7.04 0.01 All American Equity Fund GBTFX $24.61 0.05 Holmes Macro Trends Fund MEGAX $22.05 0.08 Near-Term Tax Free Fund NEARX $2.21 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change