The dollar has strengthened this week but this has caused commodities such as crude oil and copper to decrease in price, why is this?
The only way the value of the dollar can ever have an affect on anything in the US is against other currencies. So you have to think in terms of overseas trade, and how able other countries are to buy your goods at your dollar rate.
okay i hope this isnt confusing
but you have to think of the worth of a dollar as something other than $1
im going to try and use an analogy
if 1 dollar equals 2 units
and crud oil is worth 12 units you need 6 dollars to get crud oil
if 1 dollar equals 3 units (increase in the dollars worth)
and crud oil is still worth 12 units you need only 4 dollars to get crud oil(decrease in price)
basically the stronger the dollar is/the more it is worth. they less of them you need to equall the same value.
that probably made no sense to you but i hope it helped.
Sometimes the reaction is not so quick. Strong dollar generally means less dollars available, therefore the dollar is worth more and Gold becomes a bit less valuable in terms of US dollars. (This may interest you. Last week I did a little research in order to answer a question here. The price of gold in 1840 was $20.73 and I figured out the US dollar then was worth 51 times what it's worth today)
You need fewer dollars when the dollar strengthens. That's why commodities, which are sold in dollars, drop in price.