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The Relationship between Commodity Prices and Currency Exchange Rates: Evidence from the Futures Markets

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  • Yiuman Tse

    (The University of Texas at San Antonio)

Abstract

We examine the relationship between four commodity-exporting countries' currency returns and a range of index-based commodity returns. We use daily futures data to investigate the fast dynamics between commodity prices and currency exchange rates while avoiding market imperfections in the commodity spot market. We find that commodity/currency relationships exist contemporaneously but fail to exhibit lead-lag behavior in either direction. Our results indicate that futures markets are efficient in processing information and that commodity and currency futures prices respond to information shocks simultaneously on a daily basis. The results are robust across different periods ranging from July 1992 through January 2009.

Suggested Citation

  • Yiuman Tse, 2010. "The Relationship between Commodity Prices and Currency Exchange Rates: Evidence from the Futures Markets," Working Papers 0005, College of Business, University of Texas at San Antonio.
    • Handle: RePEc:tsa:wpaper:0019fin
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    References listed on IDEAS

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    More about this item

    Keywords

    Commodity; Currency; Future Markets;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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