US Dollar Continues To Strengthen Against Major Global Currencies

Australia's western Pacific Bank strategist said in April this year that the market for milk powder may soon be oversupplied, and that the price of dairy products worldwide will be suppressed, thereby putting pressure on the New Zealand currency, the largest exporter of dairy products.

At the same time, they believe that Australia's economic growth is strong, and the Bank of Australia will not cut interest rates, thus shorting the New Zealand dollar to the Australian dollar.

Kay Van-Petersen, Asia's market strategist at Saxo Capital Markets in Singapore, believes that once commodity prices hit bottom, prices of agricultural products will pick up faster than oil and other commodities. The increase in demand for milk and meat in Asia will help New Zealand's economy rebound, while slower recovery in oil prices will drag Canada's economy heavily dependent on oil.

From now on

In terms of environment, the performance of the Canadian dollar and New Zealand dollar is very bad, but the New Zealand dollar is slightly better than the Canadian dollar.

So he recommended the strategy of "milk VS oil" to his customers.

The actual situation is that between September and October, the New Zealand dollar increased by 6.2%.

The common feature of this trading strategy is that investors have found room for profit from the difference in the trend of commodity currencies.

According to Investopedia's explanation, the so-called commodity currency refers to the currency which is highly correlated with economic performance and price fluctuation of some commodities.

According to Investopedia:

Canada, for example

The high correlation with oil prices has led to oil prices as a major driver of the rise and fall of the Canadian dollar.

Countries like Australia and New Zealand are also similar.

Facts have proved that their judgement is very accurate.

The New Zealand dollar slid sharply against the Aussie dollar after its peak in April and plunged 12% in three months. Although the decline in the past two months has narrowed, it has fallen 5.6% this year.

When commodity prices depend on these countries, capital flows into their currencies, causing their currencies to appreciate.

However, some people think that paying too much attention to a specific commodity category, such as iron ore and oil, is also risky, because the influence of the environment on the currency trend may be greater.

In addition, citing Jane Foley, senior currency strategist at Rabobank International in London, Jane Foley said that the liquidity of some commodity currencies is not enough and it is difficult to become the target of trading.