Commodity Currency

Commodity currency refers to the types of currencies that move in parallel with the price of global commodity products like raw materials and natural resources such as agricultural goods.

In the foreign exchange markets, commodity currency refers to currencies such as the South African rand and the New Zealand Dollar.

One of the key features that make investing in commodity currencies so appealing to foreign exchange traders is that they can provide a more accurate estimate on the value of the currency and are also able to predict the movements within the markets based on the value of the underlying commodity.

Key takeaways:

Commodity currency refers to a type of currency that moves with the prices of global commodity products.
Currencies of countries like South Africa, Tanzania, and Brazil are tied to commodity products.
There are pros and cons attached to commodity currencies and this will depend on the price fluctuations in exports.
Foreign exchange traders enjoy trading commodity currencies as they can provide accurate value estimates and can easily predict market movements in the currencies by looking at the value of the commodities.

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