Commodity prices play a significant role in influencing forex (foreign exchange) trends because many currencies are closely tied to their country's natural resources. Here’s how commodity prices affect forex movements: 1. Commodity-Backed Currencies – Some countries, like Canada (oil), Australia (iron ore, gold), and Russia (natural gas), rely heavily on commodities for their economies. When commodity prices rise, their currencies tend to strengthen because exports bring in more revenue. 2. Inflation & Interest Rates – Higher commodity prices (especially oil and food) can increase inflation, pushing central banks to raise interest rates. Higher interest rates attract foreign investors, boosting the currency’s value. 3. Trade Balance Impact – Countries that import more commodities than they export (e.g., Japan, Europe) face trade deficits when prices rise, weakening their currency. Exporters benefit, strengthening their currency. 4. Market Sentiment & Risk Appetite – When commodities like gold surge, it often signals economic uncertainty, making safe-haven currencies (USD, CHF, JPY) stronger as investors seek stability. 5. Supply Chain & Geopolitical Risks – Wars, sanctions, and supply chain disruptions (e.g., oil production cuts by OPEC) can make commodity prices fluctuate, impacting currency values accordingly.