IDEAS home Printed from
   My bibliography  Save this paper

Commodity Currencies and Causality: Some High-Frequency Evidence


  • Ahmed, Rashad


I investigate the link between economic fundamentals and exchange rate adjustment to commodity price fluctuations. I overcome the traditional issue of simultaneity by exploiting the September 14, 2019 drone attack on two Saudi Arabian refineries as a natural experiment. This unanticipated event caused the largest 1-day global crude oil price shock in over a decade. Using high-frequency exchange rate data for 30 countries, I link the cross-section of currency movements around the event to country-specific economic and financial fundamentals. Crude export and import intensities were associated with appreciation (depreciation). Additionally, countries with higher policy interest rates and weaker financial positions experienced greater currency depreciation while safe haven currencies appreciated, consistent with 'risk-off' sentiment triggering carry trades to unwind. I also find that across currencies, estimated (pre-event) crude oil and VIX betas are tightly associated with oil-related and financial fundamentals, respectively. Therefore, exchange rate adjustment around the drone attack can also be explained by currency risk factors.

Suggested Citation

  • Ahmed, Rashad, 2019. "Commodity Currencies and Causality: Some High-Frequency Evidence," MPRA Paper 98319, University Library of Munich, Germany, revised 25 Jan 2020.
  • Handle: RePEc:pra:mprapa:98319

    Download full text from publisher

    File URL:
    File Function: original version
    Download Restriction: no

    File URL:
    File Function: original version
    Download Restriction: no

    More about this item


    Commodity; currency risk; carry trade; exchange rates; oil price; terms of trade;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F3 - International Economics - - International Finance
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:98319. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.