A Study On The Correlation Between Four Main Exchange Rate Fluctuations And The Fluctuation Of Oil Price, Gold Price And US Domestic Economic Indicators And Empirical Analysis

Globalization of financial has making global financial market closer than before. The relationship between financial markets has becoming more and more complicated. Foreign exchange market, which daily trading volume is over 5 trillion dollars, has become one of the biggest and most actively traded market for its 24-hour trading mechanism. Because of the influence of Subprime Lending Crisis and European debt crisis, Foreign exchange transactions has increase much more higher. Risk averse investors, such as non-reporting banks, hedge funds, pension funds and individual investors turned to strong currency such as dollars, yen, Australian dollar. Especially after European debt crisis, Foreign exchange market’s daily transaction had sharp decrease. But Australian dollar’s transaction volume increased very fast. It was over 40% in North America.The Federal Reserve has kept rate cut after subprime crisis in 2007, which caused dollar fell, oil price fell. Moreover, the gold price and us dollar sometimes fluctuate to the same direction.All the financial investments have risks, and same as the exchange rate. Due to the uncertainty of risk, exchange rate investments may cause investor loss and profit from price volatility. As you can see, the United States economy fluctuation will bring chain reaction in the world economic. Therefore three questions appear. First, does the long-term equilibrium still exist between the exchange rate, gold price, and oil price? Second, whether there are prediction between exchange rats? Third, the commodities price, such as oil and gold, or the main economic indicators of American can be a key predictive role of the main foreign exchange rate? So these are become our main topic of this research.This article mainly discusses about 4 main foreign exchange rate which were priced by US dollar. Use the method of econometrics to analyze gold price, oil price and key economic indicators which may affect the foreign exchange rate. And I hope to find the regularity between the main exchange rate, and the impact from those price and key indicators.At first this article was sorting data to get 4 main foreign exchange rate and 4 other main key indicators. Second it did granger causality test, cointegration test, and build vector auto regression model to process the impulse response test and analysis of variance test.The empirical result indicates that:Exchange rate, oil price and Gold price have long -term equilibrium relations. The impact from oil price to main exchange rate is higher than gold price or other indicators, even more the other exchange rate. The Unemployment Rate and Building Permits are the key indicators for economics. But those two have only small impact to exchange rate after we review the VAR model and impulse response map.