Commodity Pairs

Around the globe, there is plenty of gold, oil, and silver to be pulled out of the ground. Countries like China and Russia have no shortage of gold, and Saudi Arabia, Russia, and Iran have plenty of oil to be produced. But on the global currency markets, the currencies of these nations are not very liquid. They’re way more volatile than the U.S. dollar and other currencies from advanced economies. They also aren’t traded with the volumes of the U.S. dollar, nor of several other nations that also have high levels of commodities for production.

In the world of Forex, three different commodity pairs exist between highly traded currencies that correlate with fluctuations in global commodity prices. Those pairs consist of the U.S dollar to the Canadian dollar (USD/CAD), the Australian dollar to the U.S. dollar (AUD/USD), and the New Zealand dollar to the U.S. dollar (NZD/USD).

It’s just a coincidence that all of the countries involved based their financial systems on British Common Law. The three currencies outside of the U.S. have highly liquid currencies that react positively and negatively to the direction of the commodities that they produce.