ANALYSIS OF THE FLUCTUATIONS OF COPPER PRICES ON AUSTRALIAN DOLLAR EXCHANGE RATE

The aim of this research is to dispel the doubts about this subject and look at the commodity-currency relationship from different perspectives. We have reviewed multiple economic concepts to understand the background of the commodity-currency relationship, which will provide a clear overview of factors that explain this behaviour. The first section of the article will introduce the commodity-currency relationship with its initial background. Moreover, it will introduce the relevant articles concerning the researched topic. Subsequent sections will study the theoretical framework of the commodity-currency relationship based on the mining industry description, various economic theories, and choice of exchange rate systems. The mining industry is worth describing, as the supply of commodities is determined by production volumes in the mining sector. Economic theories describing the commodity currency relationship support the position that commodities can impact currency value. The choice of exchange rate regime is an important issue in the commodity currency relationship, as liberalization of capital markets in Australia facilitated investments in mining companies, which created the demand for the Australian dollar. Arguments within the sections are accompanied by References to scientific articles and descriptions of graphical data. The commodity-currency relationship (in our case it is copper and the Australian dollar) does exist in Australia, mainly driven by high resource availability and favorable monetary policies implemented by the country's central bank during economic shocks (e. g. booming demand for copper due to digitization since copper acts as a perfect electrical conductor). The concept is also supported by multiple scientific articles like Chen & Rogoff (2003) [5], Clements & Fry (2007) [7], and Chen et al. (2008) [6].