Historically strong ties between quotes of raw materials and currencies are broken by the several largest oil traders in the world.
Amidst the Canadian dollar weakening, little changing in price of the Norwegian krone plus the Russian ruble appreciating by 3% in the last three months, Brent oil turned to be costlier by 18% along with increasing of West Texas Intermediate by 12%. Last month that all was supplemented by the first (since 2014) 90-day negative currencies and oil correlation in the Latin America that is famously abundant in resources.
All along the collapse of oil prices in 2015-2016 one could observe the increase in correlation of raw materials and oil currencies, which was caused by producers’ facing an unexpected drop in revenues from commodity exports. Now when the traders of currency have accommodated to the newly set oil price rate lower than $60 per barrel, the country and monetary aspects gain prominence by dynamics of exchange rates.
Colin Hart, portfolio manager of BNP Paribas Investment Partners in London associates the strong commodity prices movements with a strong change in trade terms that should have implications for currencies. Though investors are still under the impression of the idea that commodities are the superior driver for the currency, raw materials really matter only under certain conditions, more specifically under a strong movement of quotes.