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Inverse relationship btwn US$ and Commodity prices, why is that?
Q1: This applies mostly to US$ priced commodities right?nnQ2) I have no economics background, but see if my logic is rightnn(1) US$ value goes up, more expensive to convert local currency to buy US$ priced commodity, demand falls, price fallsn(2) US$ value goes up, per unit dollar gets you more units of commodity. Thus, per unit price of commodity falls.nnIf my logic is wrong can someone explain why is the inverse relationship so? Thanks guys!
Answers
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ChaosNantuko answered one year ago …
Close but not quite it. Its a bit simpler then that. If the American dollar doubles, then all non-americans pay twice as much for goods priced in american dollars. Those goods aren't actually worth twice as much though, so to offset it, goods priced in american dollars will cost roughly half as much (in US dollar terms), resulting in the same end price when people buy these goods outside the USA. So when the US$ goes up, the commodity price goes does, and vice versa.
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