Why do commodities prices go down when the US dollar goes up?

Question

Why do commodities prices go down when the US dollar goes up?

Answer 1

This correlation doesn't happen every time.  But it is happening this time because the world economy is slowing down along with the US economy.  But many investors see the US economy as doing better than the economies of most other countries.

The economic slow-down is decreasing the demand and the prices for commodities.  But recent bad economic news from countries around the world is scaring many investors.  And these investors are investing their money in USA.  This is increasing the demand and the exchange rates for US dollars.

Another reason for the rising US dollar may be the decreasing US trade deficit.   USA is not buying as much as before from the rest of the world.  Which means that foreigners are getting fewer US dollars.  But the US dollar is used a lot in international trade.  And foreigners need to exchange more than before their own currencies into US dollars.  Which is increasing the demand and the prices for US dollars.

Answer 2

When the dollar rices in price, this means that more resources can be purchased from less money when importing to the US. Which means that commodities might cost less to produce. It also means to compete with commodities from outside of the country which is now cheaper, the price must fall.

Another effect is that exports will fall when the dollar rises. So less commodities are sold out of the country, making pricelevels fall.

Answer 3

They don't. It's called inflation. Some stores make sale prices to get you in to buy more expensive products though. Places are desperate to stay in business nowadays!

Answer 4

A stronger dollar means it takes fewer to buy the same amount of imported goods, as many commodities are.