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Commodities typically follow and inverse relationship with the value of the US dollar. When the US dollar strengthens against other major currencies, the prices of commodities typically drop. When the value of the US dollar weakens against other major currencies, the prices of commodities generally move higher.

There are many reasons why the value of the US dollar has an impact on commodity prices.

The main one is that commodities are priced in US dollars. When the value of the US dollar drops, it will take more dollars to buy commodities.

Another reason is that commodities are traded around the world. Foreign buyers will purchase commodities with US dollars.

Commodity traders often keep a close eye on the value of the US dollar. An easy way to monitor the US dollar is to watch the price quotes on the Dollar Index on the ICE Futures Exchange. It is an index of how the dollar is valued against a group of other major currencies around the world.

The price of the index is traded like any other futures contract and you can get quotes throughout the day.
Commodity prices don’t necessarily tick higher for every tick lower in the US Dollar Index, but there is a strong inverse relationship over time. Individual commodities can also buck the trend if other overwhelming forces are causing the price to move along with the dollar.

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