Major beneficiaries of the US currency's high correlation with commodities will be consumers in Canada and Australia because their currencies have held up against the dollar, a fund manager told Reuters. A rising dollar makes metals more expensive for holders of other currencies.
So, if for example the Canadian dollar holds steady against the dollar then consumers in Canada will pay the same for their raw materials, if it rises they will pay less.
"Australian and Canadian producers have seen a continued bid for their natural resources which also keeps their currencies strong," said Philippe Bonnefoy, founder of Swiss-based fund manager Cedar Partners said.
"The benefits may be felt most by Canadian, Australian and Asian industrial consumers where their currencies have held up, allowing lower input prices to directly and materially impact profit margins."
The dollar rose to 18-month highs against the euro on Friday, with the single currency sinking below $1.2500 on worries about a euro zone debt crisis and fears of sovereign default in the region. But the Canadian dollar and Australian dollar both commodity currencies are still relatively strong against the US currency.
The correlation between benchmark copper prices on the London Metal Exchange and the dollar against a basket of currencies using monthly data from Reuters, since the start of 2007 is a negative 70 percent.