The strength of the dollar will give no reprieve next year to already pummeled commodities markets.
Any rallies for crude oil, steel, coal, copper, and other base metals will be muted as the buck heads higher against most major currencies in 2016. It will do so because, while the U.S. economy isn’t exactly strong, it’s in a lot better shape than other key economies.
All major commodities are priced in greenbacks. So when the dollar strengthens, their prices fall if nothing else has changed. Put another way, if the dollar rallies 10%, then it buys 10% more materials than it did previously. As the U.S. dollar climbed 9.9% over the past year against a trade-weighted index of major currencies, prices of diesel fuel, natural gas, and U.S. benchmark West Texas Intermediate oil slid 40%, 39%, and 34%, respectively. Read more here.
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