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Currency pair correlations show whether there is a relationship between the value of two separate forex
pairs. Here, we explain what a currency correlation is and how to trade forex correlations with some
worked examples.
Similar to the correlation between the Canadian dollar and crude oil, the value of the Australian dollar
and gold are usually positively correlated, and the price of the US dollar is usually negatively correlated
to both.
The Australian dollar is known as a commodity currency because its value is tied closely to the value of
Australia’s commodity exports such as copper, coal, agricultural products and gold. These exports are
also often correlated to the value of the Australian dollar, but gold has arguably the greatest positive
correlation with the Australian dollar.
JPY and gold
The yen is the third most traded currency in the world, and its value often moves in tandem with the
price of gold. One reason for this is that the yen is one of the world’s reserve currencies alongside the
US dollar, the euro and the British pound.
The yen is also widely believed to be a safe-haven currency, and gold is known as a safe-haven asset.
Because of this, investors will often move their money into yen or gold in times of economic uncertainty,
or when the markets are experiencing slow growth. This often means that while the price of one unit of
yen and one unit of gold might be quite different, the overall up and down movements of these two
assets tend to mirror each other.
Some market commentators state that the reason for the correlation between the value of yen and gold
is the similarity of the real interest rates for the two assets. The real interest rate is the rate of interest
that a market participant will receive after accounting for inflation.