Thursday, August 25, 2011

Commodity prices and the Dollar Index

Taken from Yahoo Answers

Why do commodity prices rise when the dollar falls and vice versa?

consider a loaf of bread. costs one dollar. that one dollar is worth one dollar. it's an even trade. "the dollar falls". the dollar is now no longer worth a dollar. the bread is still worth the price of the dollar before it fell, so the price must be raised to compensate for the lower value of the dollar.

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