Alexander S Perez

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How do global commodity cycles affect forex currencies?

Commodity cycles—rising and falling prices of oil, metals, and agriculture—directly influence commodity-linked currencies like AUD, CAD, and NOK. Rising commodities support exporters, strengthening their currencies. Falling cycles weaken them. Institutions hedge commodity exposures via currency trades, while retail traders can align with commodity trends. Benefits: commodity cycles provide leading clues for forex. Risks: correlations shift, and short-term divergences occur. Commodity cycles highlight forex’s connection to real-world goods—currencies reflect not only money but the global demand-supply of resources.