How Foreign Exchange Impacts Indian Commodity Market

In the international market, Currency and Commodity trading has fructiferous career and the path is also followed by the Indian market. Currency and Commodities markets in India have passed a long period in becoming the most altered traded products in India following its exponential evolution trajectory. The success key of making money in trading is to predict the ensuing move in the markets. Here are some factors such as economical growth, interest rates, supply and demand, politics which affects the currencies more as some currencies are directly proportional to country’s topical industry as far as currencies are heavily correlated with the commodity prices. The Australian dollar, the Canadian dollar and the New Zealand dollar are the three currencies that have the tightest correlations with the commodities. Swiss Franc and Japanese yen have a weaker correlation bond compare to others. This information helps traders to predict the certain ensuing movements of market.

What is Foreign Exchange?

The currency market where buyers and sellers conduct foreign exchange transactions which is a global decentralized market for the trading of currencies is known as foreign exchange market. The Forex market is a golden opportunity for risk hunting investors where trade and transactions between the countries take place. The main participants in Forex market are the larger international banks. The financial centers around the worlds work as mainstay of trading between a wide range of diverse buyers and sellers around the clock, with the exceptions of weekends. This market has established the relative values of different currencies. An individual who trades in the Forex market have to keep keen observation on nation’s economic and political situation which affects the direction of its currency. The peculiar aspects of Forex market is that the volume of trading is very high .The estimated amount is around $4 trillion goes through the Forex market each day.

Impacts of foreign exchange on different commodity market:

Almost a quarter of Indian import accounts for crude oil. Rising in crude prices creates a serious concern. It creates the fiscal deficit, current amount deficit and inflation. As per situation, if crude prices are increasing day by day then it will lead to a higher inflation. If the oil price is increased by OPEC countries the ideal price of currency gets depreciated. Let’s take an example to understand this. If the price of oil is $150per barrel on particular day and then increases to $160 that implies we need to buy more USD by given rupee for paying the oil bill. The increase in Crude oil price will defiantly effect India inflation, as the impact of oil prices on inflation would probably be greater in the emerging economies like India.

  • Oil and Forex market
  • Gold and Forex market
  • Stock and Forex market
  • Oil and Forex market

Impact of Canadian Dollar on Commodity:

The price of commodities has fluctuated significantly over the past few years. Let’s take brief review of oil of past few years: $60a barrel in 2006 to a high $147.27 a barrel in 2008 and again $80 in 2011 and $102.88 in 2014.Gold traders may also be surprised to hear that trading in Australian dollar is just like trading in Gold many ways. As the world’s third largest producer of gold, it had an 84% positive correlation with the precious metal. The rise in gold prices is directly proportional to the Australian dollar. So importing Gold and hike in price of gold depreciates our Indian currency.
So if you want trade in the forex market just keep an eye on the variations and situations of country and other eye on the gold and crude oil commodity market.

How Foreign Exchange Impacts Indian Commodity Market

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