Commodity Block Currency

You’re a fan of the Detroit Lions. Every week, the Lions are bad. As a result, your morale is equally terrible. There is a strong correlation between your mood on Monday and the performance of the football team that should be banished and replaced by a team in London.

Well, in the commodity industry, we have something called a commodity block currency. Basically, the price of the commodity is the Detroit Lions, and the value of the currency is your mood on Monday morning.

The performance of commodity block currencies correlates strongly to the performance of hard commodities around the globe. Typically, the nation whose currency is being traded also has a significant amount of production in that commodity as a part of their GDP and global exports.

For example, the values of the Canadian “loonie” and the Russian ruble correlate strongly with the rise and fall of oil. The Peruvian sol rises and falls with shifts in global copper prices. Iron ore prices correlate strongly to the Australian dollar.