The point is definitely true of all US-dollar commodities (which is basically every commodity price out there). I wrote the article, actually, in response to a question from a reader of our email who was confused when I wrote: "commodities are priced in US dollars, so their price goes down as the US dollar goes up." I had initially thought perhaps that this concept was, as you say, more obvious than it actually appears to be for many people.

Original article & question is here: http://beta.finimize.com/general/too-much-oil-copper-too-lit...

Well, it's clearly not fair to accuse you of being deliberately obtuse when it was prompted by a question like that!

Anyway, thanks for the context.

:) To be fair to the person, we bill ourselves as a simple email-based daily read of the financial news (hence the Q&A function for when we're not as simple as we'd like)

I think it's mainly because a high oil price is good for the economies of oil-exporting countries, like Russia, Canada and Norway (to name a few). More exports = more economic growth. More economic growth (all things equal) should equal higher interest rates which leads to a more valuable currency.

> More economic growth (all things equal) should equal higher interest rates which leads to a more valuable currency.

In fact it works the other way - if you have high interest rates - it means people expect your currency to lose value. It's one of the less intuitive facts about currency, and the reason I'm happy I took economy course even though I dropped out of it on 4th year :)

The reason is - in "perfect knowledge world" it shouldn't matter if you keep your money for a year on bank account in country X, or if you instead change them into currency Y today, and keep it in country Y for a year (different interest rates), and then change them back to currency X.

If these 2 scenarios produce different outcomes - it means one of the banks is paying people more than it has to - contradiction in terms if I've ever seen one :)

So:

   moneyInX * (1+interestRateX) = moneyInX * exchangeRateXToYToday * (1+interestRateY) / (exchangeRateXToYAfterAYear)

   exchangeRateXToYAfterAYear = exchangeRateXToYToday*(1+interestRateY)/(1+interestRateX)

In real world people don't predict correctly 100% of the time, but in stable einvironment it's close (it's modified by the risk factor).

BTW that's what's happening in Russia now - high interest rates, recession, and currency losing value.

EDIT: but you're right that it could be caused by low growth, just the low-high interest rates mediation isn't there.

The example assumes that all other factors (like demand) remain constant. You are correct in saying that a higher oil price will lead some users to switch to a different energy source in some scenarios. The point is to explain why financial commentators say (especially recently) that "the strong US dollar is causing commodities to sell off."