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Weaker dollar gives commodities a boost

Agriculture.com Staff 12/19/2008 @ 1:55pm

A recent sharp sell-off in the U.S. Dollar was met with an equally impressive turnaround in many commodity markets.

With the dollar racing higher since midsummer, there had been general concern that U.S. exports could slow significantly. However, now that the dollar has retraced more than 50% of its rally, which began in August and recently ended in mid-November, it is sending a signal to traders that not only may the world economic crisis be easing, but financial confidence is beginning to flow into foreign countries.

Inflationary concerns are on the backburner in the U.S. and have been for a long time. However, with a credit package and cut in interest rates, there is growing concern that prices for commodities could rally as the world concerns itself with U.S. inflation. If that is the case, the recent lows established in the first week of December for the grain markets may suggest that the yearly low is in place, and prices are poised to move higher. While it may not be accurate to peg U.S. commodity prides solely to the U.S. Dollar, the inverse relationship in recent years has been strong. When the dollar has weakened, generally commodity prices (especially corn) have moved higher and the inverse is true.

If you have comments or questions, call Top Farmer at 1-800-TOP-FARM ext. 129 and ask for Bryan Doherty.

A recent sharp sell-off in the U.S. Dollar was met with an equally impressive turnaround in many commodity markets.

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