Which commodity currency is the weakest to date? Capital Economics knows

Since the commodity sector began to fall mid-2014, it was not just commodity investors who have taken a blow, but also commodity-driven economies as the result of their weaker currencies, with one UK-based research body calling for Australia and New Zealand to remain the weakest.

John Higgins, chief market economist for Capital Economics, said in a research note:

“Four of the worst-performing G-10 currencies since mid-2014 have been those of countries that export large amounts of commodities, namely the dollars of Canada, Australia and New Zealand, and the Norwegian krone.”

“Our view is that the Australian and New Zealand dollars remain most vulnerable.”

Australia is most exposed to ores, metals and coal prices; Norway and Canada - to petroleum and gas prices, while the economy of New Zealand is linked to food prices.

Here you can see the chart of the Aussie's drop.

“In a nutshell, we think oil prices are likely to continue to recover a little, iron ore and coal prices may fall further, and dairy products prices are set to remain quite weak for a while,” he said.

“If we are right, the outlook for the Canadian dollar and Norwegian krone may be brighter than that for the Australian and New Zealand dollars,” he added.

Meanwhile, Higgins did highlight that despite falling commodity prices, these currencies can be influenced by future monetary policy responses to economic softness in these countries resulting from the drop in commodity prices.

“Our end-2016 forecasts are as follows, with current levels shown in brackets: C$1.33/US$ (1.32), NOK8.25/US$ (8.25), US$0.60/A$ (0.70), and US$0.55/NZ$ (0.63),” Higgins said.