Wavering Interactions between Commodity Futures Prices and US Dollar Exchange Rates

Authors

Lucjan T. Orlowski, Sacred Heart UniversityFollow
Monika Sywak, Caldwell UniversityFollow

Document Type

Peer-Reviewed Article

Publication Date

2019

Abstract

This paper examines the intricate impact of commodity futures settlement prices on USD exchange rates. The daily data on changes in logs of futures prices and changes in logs of US dollar in euro and USD trade weighted exchange rate are tested with Bayesian VAR, multiple breakpoint regression and two-state Markov switching. Commodities include West Texas Intermediate and Brent crude oil, as well as copper and gold. The tests imply prevalence of an inverse relationship between changes in commodity futures prices and USD exchange rates, but their interactions become positive at stressful market conditions. Strengths, statistical significance and causal interactions between commodity futures prices and USD exchange rate depend on the type of commodities and market risk conditions. The relationship between WTI and USD exchange rates has been strengthening over time. Interactions between changes in gold prices and the exchange rate are very unstable.

Comments

JEL Codes: C58, F31, G13

DOI

10.3934/QFE.2019.2.221

Recommended Citation

Orlowski, L. T., & Sywak, M. (2019). Wavering interactions between commodity futures prices and US dollar exchange rates. Quantitative Finance and Economics, 3(2), 221-243. doi: 10.3934/QFE.2019.2.221.

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.