Commodity currencies explained: AUD, CAD and NZD and their links to raw materials

Commodity currencies are the currencies of countries whose economies depend heavily on exporting raw materials. In forex the term usually means three: the Australian dollar (AUD), the Canadian dollar (CAD) and the New Zealand dollar (NZD). When the prices of what these countries sell rise, their export income, investment and growth prospects tend to improve, and their currencies have often strengthened; when those prices fall, the reverse. The link is real but loose, and it competes with interest rates, risk sentiment and the US dollar for control of the exchange rate.

This guide explains what each country exports, the channels through which commodity prices reach the currency, the central banks involved, why the relationships break down, and the common mistakes traders make when they treat a commodity chart as a currency signal. It stays qualitative on purpose: correlations between commodities and currencies change too much over time for any single number to be worth quoting.

The three currencies at a glance

• Australian dollar (AUD). Australia is one of the world's largest exporters of iron ore, coal and liquefied natural gas, and also exports gold and agricultural products. China is its largest trading partner by a wide margin. The main pair is AUD/USD, nicknamed the "Aussie". The central bank is the Reserve Bank of Australia (RBA).
• Canadian dollar (CAD). Canada is a major oil producer and crude oil is its largest single export, most of it going to the United States. It also exports natural gas, metals, lumber and grains. The main pair is USD/CAD, nicknamed the "loonie" after the bird on the one-dollar coin. The central bank is the Bank of Canada (BoC).
• New Zealand dollar (NZD). New Zealand is a large exporter of dairy products, along with meat, timber, fruit and other agricultural goods. China is a key buyer. The main pair is NZD/USD, nicknamed the "kiwi". The central bank is the Reserve Bank of New Zealand (RBNZ).

Notice the quoting difference. AUD/USD and NZD/USD quote the commodity currency first, so a stronger Aussie or kiwi means a higher price. USD/CAD quotes the Canadian dollar second, so a stronger loonie means a lower price. If you are looking for the "oil up, CAD up" relationship on a USD/CAD chart, it shows up as oil up, USD/CAD down. The currency pairs guide explains base and quote in more detail.

The Norwegian krone is sometimes added to the group because of Norway's oil exports, and some emerging-market currencies, such as the South African rand and the Chilean peso, have commodity links too. They are traded as exotics with wider spreads; see exotic pairs trading costs.

How commodity prices reach a currency

There is no mechanism that converts an iron ore price into an exchange rate. Instead, several channels operate at once, with different speeds:

The terms of trade

The terms of trade compare a country's export prices with its import prices. When the price of what a country sells rises relative to what it buys, it earns more foreign currency for the same volume of exports. Exporters convert part of that income into the home currency, which is direct demand for it. Over months and years, the terms of trade have been one of the most reliable fundamental anchors for AUD and NZD.

Income, investment and growth

Higher export prices raise company earnings, tax revenues, wages in the resource sector and, eventually, investment in new mines, wells or farms. That investment often brings foreign capital into the country, which has to be converted into the local currency. The 2000s mining boom in Australia, driven by Chinese demand for iron ore and coal, is the classic example of commodity prices feeding through investment into the currency.

Central bank expectations

Stronger growth and higher incomes can lift inflation, which makes the central bank more likely to raise rates or less likely to cut them. Traders anticipate that, and the expected rate path affects the currency through the interest rate differential. This is often the fastest channel, because markets reprice rate expectations within minutes, while trade flows take months. The interest rate differentials guide explains why the gap between two countries' rates is so important.

Sentiment and positioning

Commodities and commodity currencies are both sensitive to the global growth outlook. When investors are optimistic about world growth, they tend to buy both; when they are worried, they tend to sell both. Part of what looks like a commodity link is actually a shared reaction to the same news. That matters because it means the relationship can appear strong during a global boom or bust and fade when growth is steady.

Australia: metals, China and the RBA

The Australian dollar's commodity link runs mainly through bulk exports to Asia, above all iron ore sold to Chinese steelmakers. That makes AUD sensitive to:

• Iron ore and coal prices, as broad indicators of demand for Australia's exports.
• Chinese economic data and policy, especially anything to do with construction, property, infrastructure and steel production. Chinese industrial data and trade figures are often watched by AUD traders as closely as Australian data.
• Industrial metals more broadly, such as copper, as a gauge of global industrial demand. The copper trading guide explains why copper is often treated as a barometer of the world economy.

On the domestic side, the RBA holds eight monetary policy meetings a year, a schedule it adopted in 2024. Australian monthly and quarterly inflation figures, labour force data and wage figures feed into its decisions. Because the Australian session opens while Europe and the US are asleep, AUD often makes its moves on local data and Chinese releases during the Asian session.

AUD is also one of the most sentiment-driven of the major currencies. It has tended to rise when global equity markets are buoyant and fall in sharp risk-off episodes, partly because it has often been a higher-yielding currency used in carry trades that get unwound in a sell-off. Australia allowed its dollar to float freely in December 1983, and its behaviour in global crises since then has reinforced its reputation as a "risk-on" currency.

Canada: oil, the US and the BoC

The Canadian dollar's commodity link is mainly to crude oil, and its biggest customer is the United States. Two features make the oil relationship less straightforward than it sounds:

• Canadian crude often sells at a discount to the benchmark US price because of its quality and pipeline constraints. The price Canadian producers actually receive can move differently from the headline WTI price. The Brent vs WTI guide and oil trading explained cover how the main benchmarks work.
• The US relationship dominates. Canada's economy is tightly integrated with the US through trade, supply chains and finance. US growth, US trade policy and the Federal Reserve often matter more to USD/CAD than oil does on a given day. Trade disputes and tariffs between the two countries can move the loonie sharply regardless of commodity prices.

The Bank of Canada makes eight scheduled rate announcements a year, and Canadian labour force data and consumer price inflation are the domestic releases that move CAD most. Canadian jobs data is often released on the same day and at the same time as the US employment report, which can make that slot unusually volatile for USD/CAD as two major releases land at once.

Because USD/CAD combines two currencies on the ESMA majors list, it can be traded with up to 30:1 leverage for retail clients in the EU and UK. That makes it different from AUD/USD and NZD/USD, which are limited to 20:1.

New Zealand: dairy, farming and the RBNZ

New Zealand is a small economy, and its currency is far less traded than the other two. Dairy is its largest export category, so dairy prices matter more to NZD than to almost any other major currency. The Global Dairy Trade auctions, where large volumes of dairy products are sold, are watched as a regular price signal, and changes in the farmgate milk price forecast are followed closely because they affect farm incomes across the country.

The RBNZ has made seven scheduled monetary policy decisions a year and has announced a move to eight a year from 2027. New Zealand publishes many key statistics, including consumer prices, quarterly rather than monthly, so each release carries more weight. The RBNZ was the first central bank to adopt a formal inflation target, in 1990, a fact you will often see mentioned in discussions of how inflation targeting began.

NZD and AUD tend to move together, because both are linked to Asian demand, both are sensitive to global risk sentiment and the two economies are closely connected. The cross between them, AUD/NZD, therefore often reflects differences between the two central banks more than commodity moves. Like AUD, NZD is limited to 20:1 for EU retail clients.

Why the commodity links break down

A trader who looks at a chart of oil and USD/CAD over a period when they moved closely together may conclude that one predicts the other. Look at a different period and the relationship can be weak or even reversed. Reasons include:

• Rate differentials take over. If the central bank is moving rates for reasons unrelated to commodities, such as domestic inflation or housing, the rate channel can swamp the commodity channel.
• The US dollar dominates. All three main pairs are against the dollar. A broad dollar move driven by the Fed can push AUD/USD, NZD/USD and USD/CAD regardless of what commodities are doing. The US dollar index guide shows how to see a broad dollar move.
• Hedging and production changes. Producers hedge future output, and production volumes change. A price rise does not translate into immediate income if output is hedged or falling.
• The export mix changes. Countries' export mixes shift over time. A currency can become less sensitive to one commodity as other sectors grow.
• Both are reacting to something else. A shared response to global growth news can create an apparent link that fades when the shared driver goes quiet.

The practical rule: a commodity move is context, not a trigger. The currency correlation guide explains how to measure a relationship over a recent window and why correlations computed over calm periods fail in stressed ones.

Worked examples

Pip values across the three

These use illustrative exchange rates.

• AUD/USD. The quote currency is the dollar, so 1 standard lot (100,000 Australian dollars) is worth 10 dollars per pip. For a dollar account that is fixed.
• NZD/USD. Same structure: 10 dollars per pip per standard lot.
• USD/CAD. The quote currency is the Canadian dollar, so 1 standard lot (100,000 US dollars) is worth 10 Canadian dollars per pip. For a dollar account, at an illustrative USD/CAD of 1.3500, that is 10 divided by 1.35 = 7.41 dollars per pip.

So 1 lot on USD/CAD carries less dollar risk per pip than 1 lot on AUD/USD at that rate. Use the pip value calculator for your own account currency.

Hidden stacking of the same bet

Suppose a trader with a 10,000 dollar account opens three positions in one afternoon, each risking 1% (100 dollars), all based on a view that global growth is improving: long AUD/USD, long NZD/USD and short USD/CAD. Each looks like a separate 1% trade.

In practice all three are bets on the same theme: commodity currencies up, dollar down, risk sentiment improving. If a risk-off shock hits, they are likely to lose together. The realistic risk is closer to 3% on one idea than 1% on three. If the stops gap because the shock lands overnight, the combined loss can be larger still. Sizing guidance for correlated positions is covered in the position sizing guide.

A margin comparison

For a 1 standard lot position at illustrative prices, under EU retail limits:

• AUD/USD at 0.6500: the notional value is 65,000 dollars. At 20:1, margin is 65,000 divided by 20 = 3,250 dollars.
• USD/CAD: the notional value is 100,000 dollars. At 30:1, margin is 100,000 divided by 30 = about 3,333 dollars.

The margin figures are similar here only because the AUD/USD notional is smaller. Margin is not risk: it is a deposit, and the loss on either position depends on the pip move and pip value. The margin calculator shows the figure for your own size and account.

Common mistakes with commodity currencies

• Trading the commodity chart instead of the currency. A rally in oil does not oblige USD/CAD to fall. Check whether the relationship is actually working in the current period.
• Forgetting the quote direction on USD/CAD. A stronger Canadian dollar means a lower USD/CAD price.
• Stacking AUD, NZD and CAD positions as if they were independent trades. They often share the same drivers.
• Ignoring China. For AUD and NZD, Chinese data and policy can move the currency more than domestic data.
• Ignoring the session. AUD and NZD often make large moves during the Asian session on local or Chinese data, when many European traders are not watching.
• Using 30:1 thinking on 20:1 pairs. AUD/USD and NZD/USD need more margin for the same notional size under EU retail rules than majors do.

Frequently asked questions

Why are AUD, CAD and NZD called commodity currencies?

Because exports of raw materials are a large part of each country's economy: metals and energy for Australia, crude oil for Canada, and dairy and agricultural products for New Zealand. Changes in commodity prices affect their export income, investment and interest rate expectations, which in turn affect their currencies.

Does the price of oil move USD/CAD?

Oil is one of the drivers of the Canadian dollar, and higher oil prices have often coincided with a stronger loonie, meaning a lower USD/CAD. But the US economy, Fed and Bank of Canada policy, trade policy and the broad dollar often matter as much or more. The relationship varies over time and can disappear for long periods.

Why is AUD affected by China?

China is Australia's largest trading partner and the main buyer of its iron ore. News about Chinese construction, steel production, property and economic policy affects demand for Australian exports, so AUD often reacts to Chinese data and announcements.

Why do AUD/USD and NZD/USD often move together?

Both currencies are linked to Asian demand, both are sensitive to global risk sentiment, and the two economies are closely connected. Both pairs are also priced against the US dollar, so a broad dollar move affects them in the same way. Differences between the RBA and RBNZ show up in the AUD/NZD cross.

What leverage applies to commodity currency pairs?

For EU retail clients under ESMA rules, USD/CAD is a major pair with a maximum of 30:1, because it combines two currencies on the majors list. AUD/USD, NZD/USD and AUD/NZD are limited to 20:1. UK rules are similar. See ESMA leverage limits, and remember that most retail CFD accounts lose money.

Can I trade commodity currencies by watching commodity prices?

You can use commodity prices as context, but they are not a reliable trading signal on their own. Rate differentials, the US dollar and risk sentiment often dominate, and correlations shift. Treat any relationship as something to check, not something to assume.