Commodity Correlation

The dollar's value against the euro being tightly linked to the interest rate differential between the currencies, investors have shifted funds dramatically from low-yielding dollars to higher-yielding euros in recent years. Much more worrying, however, the correlation between dollar depreciation and commodities prices has become dramatically more pronounced since 2007, as illustrated in the figure below.


Institutional investors around the world ­ prominent among them, large US public pension schemes, such as CalPERS ­ have come to view commodities as part of a rapidly growing asset class devoted to inflation-protection.

source: TD Economics