The Dollar Down Under and Commodities

Published on: 10:49AM Mar 11, 2010
There has been a lot of speculation regarding the value of the U.S. dollar index and its impact on commodities.  And yes, there is a strong correlation between the two.  Since bottoming in the fall, the dollar index has risen roughly 6%.  A rising dollar is bearish for commodities because it discourages U.S. exports and discourages U.S. imports.  Nearly 83% of the value of the U.S. dollar index is made up of the Euro, the yen and the pound.  The U.S. dollar index in recent years has had a very strong inverse relationship with crude oil prices.  Thus, at least longer term, the value of the U.S. dollar index could have a big impact on restaurant commodity prices.  But one could argue that for the short term the biggest currency influence on restaurant commodity prices could be the Australian dollar.  You see, a notable portion of the lean boneless beef that is utilized in the U.S. for ground beef products is imported from Australia.  And in the past, a rising Australian dollar has been very bullish for U.S. lean boneless beef trimming and thus ground beef prices.

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