Commodity Block Currency

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DEFINITION

A currency that belongs to a country whose economy is strongly correlated with the price fluctuations of a certain commodity.

INVESTOPEDIA EXPLAINS

For example, a large portion of the Canadian economy is tied to the price of oil, which causes the price of this commodity to become a major driver in the value of the Canadian dollar. Other countries such as Australia or New Zealand are in a similar position due to their economic dependence on precious metals such as gold. All of these countries sees money flowing in when their respective commodities rise, causing their currencies to appreciate.


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