Research On The Relationship Between Commodity Futures Price And Exchange Rate In China

The change in the exchange rate of USdollar, the majorpricing currency on futuresof international commodities, will affect the trend of futures’prices of internationalcommodities nowadays.And the change in the dollar index can be seen as therepresentative of the change in the exchange rate,the linkages between the US dollarindex and the international commodities indexes are worth discussing.Inaddition,taking the mature markets at abroad for reference,the research on thelinkages between China’s commodities indexes and the exchange rate is significantfor compiling scientific commodities and exchange rate indexes,controllingthe risk inChina’sfutures market of commodities,accelerating the financialprocess ofcommodities and improving investors’ability topredict the trend of the change inexchange rate in order to judge the trend of futures prices of commodities.The theoretical part of this article starts from the perspective of the law of oneprice to explore exchange rate pass-through,i.e.the mechanism of transfer of theexchange rate to the futures prices of commodities,including complete exchange ratepass-through and the factors of hindering the completeness of exchange ratepass-through. It also demonstrates the effect of futures prices of commodities on theexchange rate from the perspectives of current account, inflation and capital account.The empirical analysis can draw some conclusions as follows:in the maturemarkets at abroad,the negative single-way causality between the CRB and US dollarindexes occurs,the change in the US dollar index will cause the change in the CRBindex.The long-term equilibrium linkages exist between them,the continuedappreciation of dollar will lead to the decline in the futures prices of internationalcommodities in the long term,but the effect of dollar index on CRB index in the shortterm is not significant.The external shocks have a major impact on the CRB anddollar indexes.The negative bi-directional causality between China’s futures indexesof commodities and RMB index occurs,the change in the RMB index will cause thechange in China’s commodities indexes,vice versa,and the correlation between theCRB and dollar indexes in the mature markets at abroad is surpassed by thecorrelation between them. The long-term equilibrium linkages exist between China’scommodities and RMB indexes,the continued appreciation of RMB will lead to thedecline in China’s futures prices of commodities in the long term,but the effect ofRMB index on China’s commodities indexes in the short term is not significant.The external shocks have a major impact on China’s commodities and RMBindexes.Compared to CRB and dollar indexes in the mature markets at abroad,thevolatility of China’s commodities and RMB index sequences react more quickly to themarket trend,but the endurance is weaker than the former,the duration of the shocks ofconditional variance is not as good as the former.The article also compares the similarities and differences among the commoditiesindexes, the exchange rate indexes at home and abroad.Combining the theoreticalresearchwith the empirical test,the article puts forward the countermeasures to realizethe normal linkages between China’s futures market of commodities and foreignexchange market.