A:

In forex, the commodity pairs consist of the heavily-traded currency pairs and contain the Canadian, Australian and New Zealand dollars as part of the pairing. The three commodity pairs are: USD/CAD, AUD/USD, NZD/USD. These pairs are highly correlated to commodity fluctuations in the world markets and are the most heavily traded commodity pairs in forex.

Forex traders often trade these commodity pairs to gain exposure to commodity (especially oil) volatility. Although there are many countries with large natural resource and commodity reserves, such as Russia, Saudi Arabia and Venezuela, the commodities of many of these nations are usually highly regulated by their domestic governments or are thinly traded. The Canadian, Australian and New Zealand dollars are traded at high volumes and are therefore very liquid in the forex market.

For more, see Canada's Commodity Currency: Oil And The Loonie.

This question was answered by Lovey Grewal.

RELATED FAQS
  1. Are Downside Tusuki Gap patterns important when trading forex pairs?

    The most heavily intertraded national currencies on forex markets are often referred to as "commodity pairs," "the majors" ... Read Full Answer >>
  2. What are the goals of covered interest arbitrage?

    The goals of covered interest arbitrage include enabling investors to trade volatile currency pairs without risk as well ... Read Full Answer >>
  3. How do I close a long position in forex?

    Closing a long position in forex trading depends on whether you are using a broker operating under U.S. trading regulations. In ... Read Full Answer >>
  4. Where did the term 'pip' in currency exchange come from?

    The term pip is an acronym for percentage in point or price interest point. It measures a unit of change within a pair of ... Read Full Answer >>
  5. What other precious metals are there beyond gold and silver?

    Besides gold and silver, the other precious metals are platinum, palladium, ruthenium, rhodium, osmium, rhenium, germanium, ... Read Full Answer >>
  6. What countries have the largest gold reserves?

    The United States holds the largest stockpile of gold reserves in the world by a considerable margin. In fact, the U.S. government ... Read Full Answer >>
Related Articles
  1. Chart Advisor

    Traders Step Back to Assess Commodities Damage

    Traders are turning to these exchange-traded notes and exchange-traded funds to analyze key commodities and determine what could be coming next.
  2. Investing News

    Oil or Gold: Which Will Recover First?

    Not sure where oil and gold are headed? The answer is complex.
  3. Investing

    Using Fibonacci to Analyze Gold

    Use Fibonacci studies to analyze gold by picking out hidden harmonic levels that can provide major support or resistance.
  4. Investing Basics

    Penny Stocks Vs. Forex: Which Is Right for You?

    Learn more about penny stock trading and forex market trading, and why each investment class appeals to different types of investors.
  5. Forex Strategies

    Benefits & Risks of Trading Forex with Bitcoin

    Want to trade forex using bitcoins? Don’t jump on the bandwagon until you compare the risks to the benefits.
  6. Forex Strategies

    How To Trade Forex With Bitcoin

    We look at ways to trade forex with bitcoin and the pitfalls in doing so.
  7. Investing Basics

    5 Tips For Investing In IPOs

    It’s not easy to profit from IPO​s, but the money is there.
  8. Forex Fundamentals

    Chinese Yuan an Unlikely Reserve Currency

    As the world's second largest economy, China's challenge to America’s dominance includes a push to make the yuan (RMB), the world’s reserve currency. Whether it can do that now is unclear.
  9. Investing

    Deflate Inflation with These 9 Assets

    Now might not be the right time, but investing in these assets may eventually prove to be good hedges against inflation.
  10. Investing Basics

    American Oil Production's Amazing, Crude Future

    Is America producing more crude oil than it is consuming? How is technology changing the American oil industry? What will domestic oil industry look like in the near future?
RELATED TERMS
  1. Transfer Risk

    The risk that a local currency cannot be converted into the currency ...
  2. Benchmark Crude Oil

    Benchmark crude oil is crude oil that serves as a pricing reference, ...
  3. Christmas tree (oil and gas)

    A vertical assembly of mechanical elements used in oil exploration ...
  4. N.V. (NV or Naamloze Vennootschap)

    An acronym for the Dutch phrase Naamloze Vennootschap, a public ...
  5. FPSO (Floating Production Storage and Offloading)

    Acronym for Floating Production Storage and Offloading. FPSO ...
  6. Day rate (oil drilling)

    In oil production, a day rate is the amount a drilling contractor ...

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!