Currency Strengths and the Demand for Raw Materials

Filed in archive Commodities on February 23, 2008

The relationship between China's currency, the yuan renminbi, and the US dollar has been a focus of attention for months now. The yuan is stronger than its ever been and is continuing to climb against the dollar. But politicians in the US don't seem happy with and China bashing continues...

I saw an interesting piece recently on factors that affect the dollar. The article, 13 Unconventional Factors that Affect the Dollar, included a few factors I hadn't considered before. One of them was Chinese demand for raw materials.

Adam Kritzer wrote the article a few days ago. He suggested that "China's unending economic boom is one of the prime factors behind the global rise in commodity prices." "Okay; so what," I thought. He says it's simple: "those countries with large reserves of natural resources have seen their economies boom and their currencies rise." (Emphasis added.)






Relatively speaking, America has less to offer in terms of raw materials than many countries - especially in the context of the size of its economy. Countries like Canada and Australia, with small populations and small economies (compared to the US) have seen their currencies strengthen.

I don't know if it's that simple. But, according to Kritzer, it's at least a factor...