Sign In with Google
Sign In with Facebook
In Forex Trading, FX Majors are the most frequently traded currency pairs consisting of the US Dollar and another major currency such as the Euro, Japanese Yen and British Pound. Pairs containing a ‘Commodity Currency’ such as the Australian, Canadian and New Zealand Dollar, paired with the US Dollar are also classified as Major Currencies. You can find these pairs listed as AUD/USD, USD/CAD and NZD/USD when trading Forex.
Global currencies are fiat instruments, backed fully by a legal tender. Governments are responsible for maintaining the value of their nation’s fiat currency as they are not supported by a commodity.
In the past, major currencies often used commodities such as gold and silver to back their currency’s value in the Forex Market, but this acted as an obstacle when countries needed to make changes in their monetary supply.
Trade over 55 Forex Pairs including AUD/USD, USD/CAD and NZD/USD with 1:500 leverage Broker EagleFX !
What are Commodity Currencies?
Countries rich in natural resources have an implied backstop of production, which is why their currencies can be called ‘Commodity Currencies’.
Even though their nations use fiat currencies in the global financial system, the country’s ability to extract commodities from the earth contributes to their exports and flows of revenue.
As the name implies, Commodity Currencies are greatly influenced by the prices of commodities.
For example, the price value of the Aussie Dollar is highly influenced by the nation’s abundant commodities such as mining, beef farming, wool or wheat. Since Australia and China are strong trading partners, the Australian Dollar tends to display strength when China does.
AUD Gains Strength in Times of Trouble
The Aussie Dollar has benefited greatly over recent weeks, as countries around the world cling on to the hope of continued economic recovery. For the AUD/USD Pair, August was the fifth month of its ongoing rally, reporting a 20% increase from March!
Naturally, many global currencies have experienced high levels of volatility in 2020, but the Australian Dollar seems to have recovered at a faster pace compared to the Euro (up 8% since March) and the Japanese Yen (up 2% since March).
Currently, the AUD/USD pair is moving towards its highest levels since August 2018, and market sentiment is extremely bullish. Apart from a steady decline in COVID-19 cases, the strength of the Aussie Dollar is being fuelled by the rise in demand for commodities such as Iron. China’s demand for the metallic rock has pushed the price upwards by 55% to $125 per tonne, which hasn't happened since February 2014!.
With global economic recoveries gaining traction, demand for Australia’s valuable exports could continue to increase, leading to an appreciation of the Aussie Dollar over the next few months!
Trade over 55 Forex Currency Pairs, including FX Majors, Crosses and Exotics with EagleFX. Sign up and start trading with a minimum $10 deposit at EagleFX today!
