Commodity currencies lose forecasting power, leading to increased market volatility.
The article explores how currencies of countries that export commodities like Australia and Canada are linked to changes in commodity prices. The researchers found that these currency values tend to move in sync with overall commodity indexes rather than specific commodities. They also discovered that these currencies used to predict changes in commodity prices, but this predictive power has weakened over time due to changes in how commodities are traded. These shifts could lead to more volatility in both currency and commodity markets, which is important to keep an eye on in the global financial system.