InvestorQ : I am told that base metal prices also depend on the strength and weakness of the dollar. Is that correct and if so, why?
Siya Saran made post

I am told that base metal prices also depend on the strength and weakness of the dollar. Is that correct and if so, why?

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Dawn Cherian answered.
3 years ago
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Weakness of the dollar, which became more pronounced since January 2017, has been one of the key reasons driving the strength in base metals. Similarly, strength in dollar in the second half of 2018 has been responsible for depressing the prices of these base metals. Since base metals are measured in dollar terms, any weakness in the dollar tends to magnify the performance of these base metals. Since January 2017 there are two changes that have weakened the dollar. Firstly, the Fed has appeared less hawkish in its monetary stance as growth and inflation have failed to keep pace with the Fed expectations. Secondly, the Trump government has faced pressure from its own Republican Party in pushing the scrapping of Obamacare through. Investors are increasingly getting sceptical about Trump’s ability to push through critical reforms on the tax cuts and infrastructure spending front. These have resulted in the dollar index weakening below the 95 levels and have been instrumental in boosting the price of base metals. Of course, these factors keep changing and once the dynamics of the dollar change, the dynamics of the base metal prices also change along with that.

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