HOW DOES COAL PRICE AFFECT THE CURRENCY MARKET?

Human civilization relied heavily on the coal for years as the main source of energy. We know the main source of energy during industrial revolution in United Kingdom was the coal. Even today coal remain indispensable source of energy to the industrialized world.

Commodity market is always a key issue for the currency market. We already know that the price of a commodity in international market is determined simply by the demand and supply factors of the commodity. Similarly, the the price of the coal in international market is determined by the demand and supply factor of the coal.

In the following table find the top coal exporters and importers of the world.

The demand of coal in emerging economies like China and India is higher than the developed economies. The coal importers are in the demand side of the coal market, and the coal exporters are in the supply side of the coal market. 

Australian dollar, Chinese Yen and Japanese Yen are some of the top affected currencies by coal market. Australia exports coal to the countries that have higher demand of coal, which made the Australian Dollar highly correlated with coal price.

The currencies that are in the demand side in coal market are negatively correlated with coal price. Unlikely, the currencies in the supply side in coal market are positively correlated with coal price.

In forex trading, the coal market analysis is significantly important, specially to trade the Australian Dollar.

Forex traders need to analyze the demand and supply factors of coal, for instance increase/decrease in coal demand and supply.

Sometimes the economic indicators can also indicate the increase/decrease of coal demand/supply, for example increase in Chinese Manufacturing PMI indicates that the demand of coal in China may increase.

Mentionable, currencies of most of top coal exporters and importers are not commonly traded in the currency market, that is why forex traders may see less effects of coal price in their daily trading.

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