A Study on Relationship Between Price of Us Dollar and Selected

Commodities

Dr. G. Sankararaman1, Mr.S.Suresh

2, Ms. T. Komatheswari

3, Dr.S.T.Surulivel

4,

Dr.S.Selvabaskar5, Dr.V.VijayAnand

6 & Dr.V.Rengarajan

7

1 & 2Professors, Department of Management Studies, Rajalakshmi Engineering College, Chennai

3 Show Room Manager, Bharati Airtel, Chennai

4Senior Assistant Professor, School of Management, SASTRA Deemed University, Thanjavur

5 Associate

Professor, School of Management, SASTRA Deemed University, Thanjavur

6 &7 Assistant Professors, School of Management, SASTRA Deemed University, Thanjavur

ABSTRACT

This study examines the relationship between US dollar exchange rates and commodity prices.

There are many factors influencing the commodity price but this study focuses US Dollar

exchange rate alone. Instead of taking more number of commodities only five commodities were

selected for the analysis they are gold, crude oil, sugar, potato and cardamom. Data sets of the

period from January 2006 to December 2015 used for the study. Statistical tool used to analyze

the study are correlation, regression and trend analysis. There exist an inverse relationship

between US dollar exchange rate and gold price. US dollar exchange rate has an impact on

Crude oil price, sugar price, and potato price. But US Dollar exchange rate and cardamom price

are not correlated. From the study it is observed that cardamom price is not affected by US dollar

exchange rate. The results indicate that in the long run the impact of US dollar exchange rate

changes on commodity prices is negative and statistically significant.

Key Words: Dollar Exchange Rate, Gold Price, Crude Oil Price and Gold Price.

Introduction

Since many agricultural commodities are priced in US dollars in international markets, a weaker

dollar may increase the demand for agricultural commodities of foreign consumers and thus the

prices of agricultural commodities. Note, that the price impact of the demand shift of agricultural

commodities may be particularly large since it is believed that the demand and supply of these

commodities are price inelastic. Another reason of the inverse relationship between agricultural

commodity prices and the US dollar exchange rate may be inflation. Investors and speculators

invest in agricultural commodity futures when the US dollar depreciates because they are

concerned about high inflation rates, thus driving up agricultural commodity and food prices.

International Journal of Pure and Applied MathematicsVolume 119 No. 15 2018, 203-224ISSN: 1314-3395 (on-line version)url: http://www.acadpubl.eu/hub/Special Issue http://www.acadpubl.eu/hub/

203

The purpose of this study is to examine the long-run relationship between, US dollar exchange

rates and the prices of five selected world agricultural commodities. It mainly investigates the

effects of increases and decreases in US Dollar exchange rate on agricultural products. In order

to analyze the relation between US exchange rates, and agricultural commodity price, data sets

based on yearly observations from 2005 to June 2015is used. In particular, five data sets were

used in the present study, of which the first is consisted of one energy commodity price(oil price)

the second of one metal commodity price(Gold Price) and third of selected three agricultural

commodity prices namely sugar, cardamom, potato prices. In this study data is collected through

secondary research. Correlation, Regression, Descriptive statistics and Trend analysis are the

tools use for the study.

Need for the study

1. The purpose of the study is to examine the long-run relationship between, US dollar

exchange rates and the prices of agricultural commodities.

2. This study provides the behavioral pattern of commodity prices in accordance with

increase or decrease in the value of US Dollar

3. This study will help the investor to find the better investment avenues in the commodities

market.

4. This work would be helpful to the investors at the time of their investment decisions

Objectives of the study:

Primary objective:

To determine the relationship between exchange rate of US Dollar and commodities price

movements.

Secondary Objectives:

1. To study the relationship between US Dollar and Crude oil price movements.

2. To analyze the relationship between US Dollar and Gold price movements

3. To study and analyze the impact of exchange rate of USD on Sugar price.

4. To study and analyze the impact of exchange rate of USD on Cardamom price.

5. To study and analyze the impact of exchange rate of USD on Potato price.

Research Methodology

The type of research design used in the study was Analytical research, because it helps to

describe a particular situation prevailing in an environment. For causal research to establish the

quantitative relationship between prices of commodities and USD exchange rate were collected

from the various secondary sources like newspapers, internet, magazines, books, journals. The

data used in this study consist of yearly observations of the period from 2006 to 2015 for the

Indian prices of agricultural commodities, the crude oil prices and the real effective US dollar

exchange rates.

Following Statistical Tools were used in the study: Correlation, Regression and Trend Analysis

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Hypotheses: 1. Hypothesis Assumed (H0): No relationship between USD exchange rate and Sugar price.

Alternative Hypothesis (H1): Relationship exists between USD exchange rate and Sugar price.

2. Hypothesis Assumed (H0): No relationship between USD exchange rate and Potato price.

Alternative Hypothesis (H1): Relationship exists between USD exchange rate and Potato price.

3. Hypothesis Assumed (H0): No relationship between USD exchange rate and Cardamom price.

Alternative Hypothesis (H1): Relationship exists between USD exchange rate and Cardamom

price.

4. Hypothesis Assumed (H0): No relationship between USD exchange rate and Gold price.

Alternative Hypothesis (H1): Relationship exist between USD exchange rate and Gold price

5. Hypothesis Assumed (H0): No relationship between USD exchange rate and Crude oil price.

Alternative Hypothesis (H1): Relationship exist between USD exchange rate and Crude oil price

Review of Literature

The Relationship between Oil, Exchange Rates, and Commodity Prices Ardian Harri, Lanier

Nalley, and Darren Hudson; Journal of Agricultural and Applied Economics, (August 2009)

To examine the price relationship through time of the primary agricultural commodities,

exchange rates, and oil prices. Methodologies used are 1. ADF Unit Root Test 2. Johansen Trace

Co integration Test This paper finds that commodity prices are linked to oil for corn, cotton, and

soybeans, but not for wheat, and that exchange rates do play a role in the linkage of prices over

time.

Common factor analysis on a panel of fifty-one international commodity prices by Chen et

al. (2010) uses data from January 1980 to December 2009.

The study uses the PANIC (Panel Analysis of Non motionless in Idiosyncratic and Common

Components) procedure developed by Bai and Ng (2004) and identifies two common factors for

commodity prices. The results indicate that the first common factor is non-stationary, while the

second common factor is stationary. The graphical evidence shows that the first common factor

is a mirror image of the US exchange rate. Thus, the study concludes that the highly persistent

movements of commodity prices are mainly attributed to the first common component, which is

closely related to the US exchange rate, while the stationarity of the second common factor

implies short-lived deviations from equilibrium price dynamics reflecting changes in the world

demand and supply conditions in accordance with prices theories (Kellard and Wohar, 2006;

Wang and Tomek, 2007).

Study on dynamic relationship among gold price, oil price, exchange rate and stock market

returns K. S. Sujit and B. Rajesh Kumar International Journal of Applied Business and

Economic Research,(2011)

This study is an attempt to test the dynamic relationship among gold price, stock returns,

exchange rate and oil price. This study consist the following methodology 1.Unit root tests;

2. Granger causality test, 3.Cointegration; 4.Vector auto regression (VAR) . The results show

that exchange rate is highly affected by gold price &oil price. However, stock market has fewer

roles in affecting the exchange rate.

Relationships between the prices of crude oil and several food commodities-The study by

Ghaith and Awad (2011) uses co integration analysis to investigate long-run relationships

between the prices of crude oil and several food commodities (e.g. maize, wheat, sorghum,

soybean, barley, linseed oil, soybean oil, and palm oil) for the period from January 1980 to

International Journal of Pure and Applied Mathematics Special Issue

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December 2009. The results indicate that there is strong evidence of long-run relationship

between crude oil and food commodity prices.

The dynamic relationship between oil price, US dollar exchange rate and twenty four world

agricultural commodities, by Nazlioglu and Soytas (2012) examines the dynamic relationship

between oil price, US dollar exchange rate and twenty four world agricultural commodities in a

panel framework using classical panel co integration and causality analysis for the period from

January 1980 to February 2010. The empirical results on panel co integration indicate that the

impact of an increase in the oil prices is positively significant in all individual agricultural

commodities except in the case of cotton and coffee. Furthermore, the impact of a decline in the

value of the US dollar is positive in all individual agricultural commodity prices except in the

case of coconut oil, cacao, and coffee. With regard to the panel coefficients, agricultural

commodity prices are positively correlated with the oil prices with an estimated coefficient of

0.25, and are negatively correlated with the US dollar exchange rate with an estimated

coefficient between -0.71 and -0.72.

A study on impact of select factors on the price of Gold Dr. Sindhu (Mar. - Apr. 2013) (10) IOSR Journal of Business and Management (IOSR-JBM)

To study the influence of factors like exchange rate of US dollar with INR, Crude oil Prices, repo

rate and inflation rate on gold prices. Methodologies used are Trend Analysis Standard

Deviation, Regression and Correlation. There exists an inverse relation between the US$ and

gold prices. The crude oil prices have an impact on the gold prices. Gold prices and repo rates

are interdependent. Gold prices and inflation rates are also dependent and positively correlated

The relationship between agricultural commodity prices, crude oil prices and US dollar

exchange rates: a panel VAR approach and causality analysis - Anthony N. Rezitis;

International Review of Applied Economics, 2014. This study examines the relationship between

crude oil prices, US dollar exchange rates and thirty selected international agricultural prices and

five international fertilizer prices in a panel framework 1.panel VAR approach 2.causality

analysis. The empirical results of the present study indicate that crude oil prices as well as US

dollar exchange rates affect international agricultural Commodity and fertilizer prices.

Relationship between Crude oil price and Rupee, Dollar Exchange Rate: An Analysis of

Preliminary Evidence - Dr.A.Hidhayathulla1 & Mahammad Rafee B (Mar-Apr-2014). IOSR

Journal of Economics and Finance (IOSR-JEF) To examine the effects of oil price on exchange

rate of Indian rupee against US dollar using time series data from 1972-73 to 2012-13. Multiple

Linear Regression Oil price and imports are rising continuously. This pushes up the demand for

dollar which strengthens the dollar against rupee and Indian rupee is continuously depreciating.

This erodes purchasing power of Indian currency in the international market.

An Econometric Analysis between Commodities and Financial Variables: The Case of

Southeast Asia Countries Norasyikin Abdullah Fahami ; SharazadHaris; Hasyeilla Abdul

Mutalib (June 2014) . International Journal of Business and Social Science Researchers try to

find relationship between commodities (crude oil and gold) and two commodity-relevant

financial variables (exchange rate and the equity index). The methodologies used are 1.Unit Root

Test 2.Johansen Juselius Co integration Test 3.Granger’s Causality Test. From the study it is

found that there is bidirectional causality between the leading index and exchange rate.ii.

Exchange rate Granger causes crude oil (unidirectional causality) iii. Gold is the least affected

commodity and also commodity that play fewest roles in affecting other variables.

Empirical analysis of agricultural commodity prices, crude oil prices and US dollar

exchange rates using panel data econometric methods - Anthony N. Rezitis; International

International Journal of Pure and Applied Mathematics Special Issue

206

Journal of Energy Economics and Policy, 2015 The purpose of the study is to examine the long-

run relationship between crude oil prices, US dollar exchange rates and the prices of thirty

selected international agricultural prices and five international fertilizer prices using panel

econometric methods.

1. Panel unit root analysis

2. Panel error correction analysis

3. Panel co-integration analysis

The results of this study indicate that when unobserved heterogeneous effects with common

factors are considered, effects of oil prices and USD exchange rates on agricultural commodity

prices are much weaker than in the case in which such effects are not considered.

The Relationship between Gold Prices and Exchange Value of US Dollar in India Girish

Karunakaran Nair; Nidhi Choudhary; Harsh Purohit;(2015),(10) ISSN(Emerging Markets

journal) The main objective of the paper is to understand the impact of recession of 2008 on

relationship between exchange rate of US dollar in INR and gold prices in India the methodology

used are 1. Johansen Co-Integration; 2.Ganger Causality. The relationship between two variables

under study has been dynamic and inconsistent in nature. The study concludes that the

relationship between gold prices and USD exchange rate has been impacted by recession in

India.

Impact of Crude Oil Price and Exchange Rate on Performance of Indian Stock Market

Saurabh Singh; Ritika Kapil(2016);13; ISSN(Asian Journal of Research in Banking and

Finance) The main objective of the paper is to investigate empirically the dynamic relationship

among crude oil price, exchange rate and Indian stock market and the methodology used are

Correlation, Regression Granger-causality approach Augmented Dickey Fuller (ADF) test.

Finally it is found that there is a significant negative correlation between nifty returns and

exchange rate and significant positive correlation between nifty returns and crude oil, and a

unidirectional causality running from nifty returns to exchange rates and crude oil price to nifty

returns.

A Study on Performance of Select Commodities Due to Demonetisation - Sankararaman, et

al, (2018), International Journal of Pure and Applied Mathematics, ISSN: 1314-3395 The

study mainly focuses on Indian commodity market, and the effects of implantation of

demonetization in commodity market. It takes into consideration of investor’s investment pattern

in select commodities. This study tries to educate the impact of change in money value that

reflects in the purchasing the commodities by the investors. It tries to achieve the optimum return

using derivative instruments hedging techniques .This study provide the investors for their

investment portfolio in future on commodity market. There is a myth among the investors there

is a rise in price of gold will always dependent to rise in price of crude oil which will be vice

versa. This study will clearly states the dependency and price fluctuation in gold and crude oil

and also identify their relationship of select commodity in demonetization period.

Results and Discussions

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Table 1

Table showing value of Crude oil and USD in INR

YEAR CRUDE OIL USD

2006 2744.364 45.63

2007 4185.583 41.29

2008 3317.083 43.18

2009 3259.846 48.35

2010 3636.5 45.34

2011 4219.909 46.67

2012 4924.2 53.49

2013 5293.5 58.62

2014 6230.5 61.05

2015 4864.75 63

Table 2

Correlation coefficient

Correlations

Crudeoil USD

Crudeoil Pearson Correlation 1 .786**

Sig. (2-tailed) .007

N 10 10

USD Pearson Correlation .786**

1

Sig. (2-tailed) .007

N 10 10

**. Correlation is significant at the 0.01 level (2-tailed).

Correlation coefficient value of 0.786 indicates strong correlation between US Dollar exchange

rate and crude oil. Oil imports became a substantial source of demand for dollar in India’s

foreign exchange market. This strong oil demand contributes to strengthen the dollar against

Indian rupee, among the other factors.

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Graph: 1

USD in INR vs Crude oil Price in INR

From the above mentioned graph it is inferred that during the period of 2007 to 2010, Oil price

rising continuously. This oil import pushes up the demand for dollar which strengthens the dollar

against rupee and Indian rupee is continuously depreciating. This erodes purchasing power of

Indian currency in the international market.

Regression

Hypothesis Assumed (H0): No relationship between USD exchange rate and Crude oil price.

Alternative Hypothesis (H1): Relationship exists between USD exchange rate and Crude oil

price.

Table 3

Regression output: Dependent variable considered- Crude oil price

Model Variables Entered Variables Removed Method

1 USDa . Enter

a. All requested variables entered.

b. Dependent Variable: Crude oil

Table 4

Model Summary

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .786a .617 .570 703.225

a. Predictors: (Constant), USD

0

10

20

30

40

50

60

70

0

1000

2000

3000

4000

5000

6000

7000

YEAR 2006 2007 2008 2009 2010 2011 2012 2013 2014

CRUDE OIL

USD

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Table 5

ANOVA

Model Sum of Squares df Mean Square F Sig.

1 Regression 6383544.070 1 6383544.070 12.908 .007a

Residual 3956201.861 8 494525.233

Total 1.034E7 9

a. Predictors: (Constant), USD

b. Dependent Variable: Crude oil

Table 6

Coefficients

Model

Unstandardized Coefficients

Standardized

Coefficients

t Sig. B Std. Error Beta

1 (Constant) -1092.714 1508.436 -.724 .489

USD 106.567 29.661 .786 3.593 .007

a. Dependent Variable: Crudeoil

Significant correlation with R=0.786. R square value shows that approximately 61% of variation

in Crude oil prices accounted for with US Dollar value.

Significant linear regression with p value=0.007. Regression Equation is – Y=106.567 X -

1092.714.Since P-value is <0.05 H0 is rejected, Thus there is exists relationship between USD

exchange rate and Crude oil Price. The –ve intercept of t value as well as –ve intercept of

regression equation shows the inverse relation between the US$ and Crude oil prices Graph 2

TREND: USD Vs CRUDE OIL PRICE

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Trend line equation for Crude oil price is Y= 296.1x-591041

From the trend line for Crude oil we can conclude that on average price of the crude oil increases

by 296.1 rupees per barrel every year.

Table 7

US Dollar Exchange rate in INR Vs Potato price in INR

YEAR POTATO/kg in INR USD in INR

2006 5.784 45.63

2007 6.234 41.29

2008 5.7346 43.18

2009 9.5836 48.35

2010 6.113 45.34

2011 5.7297 46.67

2012 8.3448 53.49

2013 9.4552 58.62

2014 8.4872 61.05

2015 10.56 63

Table 8

Correlation coefficient

POTATO USD

POTATO 1

USD 0.825873836 1

Graph 3

Lowest price of potato l kg was recorded in the year 2008 = Rs. 5.73

Highest price of potato l kg was recorded in the year 2015 = Rs. 10.56

Potato prices shoot up drastically in the year 2009 and 2012 due to high inflation rate, in the

same corresponding year Indian rupee against US Dollar value weakens.

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Graph: 4

Trend Analysis of USD and Potato in INR

Trend line equation of potato is Y=0.444x-885.06 From the trend line for Potato we can conclude that on average price of the potato increases by

0.444 rupees every year and USD exchange rate value is also increasing on the average of 2.3552

rupees every year.

Regression Hypothesis Assumed (H0): No relationship between USD exchange rate and Potato Price.

Alternative Hypothesis (H1): Relationship exist between USD exchange rate and Potato Price

Table 9

Variables Entered/Removed

Model Variables Entered Variables Removed Method

1 USDa . Enter

a. All requested variables entered.

b. Dependent Variable: Potato

Table 10

Model Summary

Model R R Square Adjusted R Square

Std. Error of the

Estimate

1 .827a .685 .645 1.12004

a. Predictors: (Constant), USD

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Table 11

ANOVA

Model Sum of Squares df Mean Square F Sig.

1 Regression 21.797 1 21.797 17.375 .003a

Residual 10.036 8 1.254

Total 31.833 9

a. Predictors: (Constant), USD

b. Dependent Variable: Potato

Table 12

Coefficients

Model

Unstandardized Coefficients

Standardized

Coefficients

t Sig. B Std. Error Beta

1 (Constant) -2.302 2.403 -.958 .366

USD .197 .047 .827 4.168 .003

a. Dependent Variable: Potato

Significant correlation with R=0.827. R square value shows that approximately 68% of

variation in Potato prices accounted for with US Dollar value.

Significant linear regression with p value=0.003.

Regression Equation is – Y=0.197X -2.302

Since P-value is <0.05 H0 is rejected, Thus there is exists relationship between USD exchange

rate and potato Price. The negative intercept of t value as well as negative intercept of regression

equation shows the inverse relation between the US$ and Potato prices. US Dollar Exchange rate vs Sugar Price

Table 13

USD and sugar in INR

Year sugar/kg US dollar

2006 19.64274 45.63

2007 12.31599 41.29

2008 14.63158 43.18

2009 25.1131 48.35

2010 32.18575 45.34

2011 27.67131 46.67

2012 28.55937 53.49

2013 30.7 58.62

2014 33.23 61.05

2015 33.21 63

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Table no 14

Correlation coefficient

Correlations

USD Sugar

USD Pearson Correlation 1 .765**

Sig. (2-tailed) .010

N 10 10

Sugar Pearson Correlation .765**

1

Sig. (2-tailed) .010

N 10 10

**. Correlation is significant at the 0.01 level (2-tailed).

From correlation coefficient value of 0.765 it is inferred that USD exchange rate is highly

(positive) correlated with Sugar price. In the commodity market most commodities are priced in

dollars, since India is the 2nd highest exporter of sugar, sugar price is highly dependent on

exchange rate.

Graph 5

USD in INR vs Sugar Price in INR

Lowest value of the sugar was observed in the year 2007= RS.12

Highest value of the sugar was observed in the year 2014= RS.33

The graph shows that from 2006 to 2010 sugar maintains inverse relationship with USD

exchange rate because during this period Indian economy was down and global recession lies in

this period. After 2010 sugar price increase steadily along with the increasing exchange rate. It is

inferred that sugar price is influenced by exchange rate.

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Graph: 6

Trend Analysis of USD and sugar in INR

Trendline equation of USD is Y=2.3552x-4684.4

Trendline equation of sugar, y = 2.3132x - 4624.6. From the trendline for sugar, we can conclude that on average price of the sugar increases by

2.313 rupees every year. And USD exchange rate value is also increasing on the average of

2.3552 rupees every year.

Regression Result: Hypothesis Assumed (H0): No relationship between USD exchange rate and Sugar price.

Alternative Hypothesis (H1): Relationship exists between USD exchange rate and Sugar price

Table 15

Regression output: Dependent variable considered: sugar price.

Variables Entered/Removedb

Model Variables Entered Variables Removed Method

1 USDa Enter

a. All requested variables entered.

b. Dependent Variable: Sugar

Table 16

Model Summary

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .765a .586 .534 5.24398

a. Predictors: (Constant), USD

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Table 17

ANOVAb

Model Sum of Squares df Mean Square F Sig.

1 Regression 310.903 1 310.903 11.306 .010a

Residual 219.995 8 27.499

Total 530.898 9

a. Predictors: (Constant), USD

b. Dependent Variable: Sugar

Table 18

Coefficientsa

Model

Unstandardized Coefficients Standardized Coefficients

t Sig. B Std. Error Beta

1 (Constant) -11.683 11.248 -1.039 .329

USD .744 .221 .765 3.362 .010

a. Dependent Variable: Sugar

Significant correlation with R=0.765. Approximately 64% of variation in sugar prices accounted

for with US Dollar value.

Significant linear regression with p value=0.01.

Regression Equation is – Y=0.744X -11.683

Since P-value is <0.05 H0 is rejected, Thus there is exists relationship between USD exchange

rate and Sugar Price. The negative intercept of t value as well as negative intercept of regression

equation shows the inverse relation between the US$ and sugar prices.

US Dollar Exchange rate in INR vs Cardamom Price INR

Table 19

Cardamom and USD in INR

Year cardamom kg US dollar

2006 450.3432958 45.63

2007 500.7421746 41.29

2008 662.0466624 43.18

2009 779.5978589 48.35

2010 1417.871676 45.34

2011 872.2244496 46.67

2012 1049.455657 53.49

2013 831.0839867 58.62

2014 875.8550972 61.05

2015 907.4247348 63

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Table 20

Correlations

USD Cardamom

USD Pearson Correlation 1 .264

Sig. (2-tailed) .460

N 10 10

Cardamom Pearson Correlation .264 1

Sig. (2-tailed) .460

N 10 10

Correlation coefficient value 0.264 depicts the weak relationship between cardamom price and

US Dollar exchange rate. Since Cardamom is festive season commodity majority of the trading

takes place during festive season, and cardamom price depends on demand, supply and

production factors.

Graph: 7

USD in INR vs Cardamom Price in INR

Lowest price accounted in the year 2006: Rs.450/kg

Highest price accounted in the year 2010: Rs.1417/kg.

Reason for cardamom price hike in the year 2010 is growing domestic consumption, strong

export demand, amid lower production in Guatemala.

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Graph 8

Trend Analysis of USD exchange rate and Cardamom Price in INR

Trendline equation for Cardamom price is Y= 47.56x-94800 From the trendline for Cardamom we can conclude that on average price of the cardamom

increases by 47.56 rupees per kg every year. And USD exchange rate value is also increasing on

the average of 2.3552 rupees every year

Regression Result: Hypothesis Assumed (H0): No relationship between USD exchange rate and Cardamom price.

Alternative Hypothesis (H1): Relationship exists between USD exchange rate and cardamom

price

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Table 21

Variables Entered/Removedb

Model Variables Entered Variables Removed Method

1 USDa . Enter

a. All requested variables entered.

b. Dependent Variable: Cardamom

Table 22

Model Summary

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .264a .070 -.046 282.56098

a. Predictors: (Constant), USD

Table 23

ANOVAb

Model Sum of Squares df Mean Square F Sig.

1 Regression 47990.642 1 47990.642 .601 .460a

Residual 638725.656 8 79840.707

Total 686716.298 9

a. Predictors: (Constant), USD

b. Dependent Variable: Cardamom

Table 24

Coefficientsa

Model

Unstandardized Coefficients Standardized Coefficients

t Sig. B Std. Error Beta

1 (Constant) 369.893 606.101 .610 .559

USD 9.240 11.918 .264 .775 .460

a. Dependent Variable: Cardamom

Significant correlation with R=0.264. R square value shows that approximately 6% of variation

in Cardamom prices accounted for with US Dollar value.

Significant linear regression with p value=0.460.

Regression Equation is – Y=9.240 X =369.893

Since P-value is >0.05 H0 is accepted, Thus there is exists no relationship between USD

exchange rate and cardamom Price.

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US Dollar Exchange rate in INR vs Gold oil Price in INR

Table 25

Gold and USD in INR

Year Gold Price dollar

2006 6255 45.63

2007 6890 41.29

2008 8892 43.18

2009 11077 48.35

2010 12280 45.34

2011 15560 46.67

2012 20880 53.49

2013 22240 58.62

2014 21480 61.05

2015 19760 63

Table 26

Correlations

USD Gold

USD Pearson Correlation 1 .874**

Sig. (2-tailed) .001

N 10 10

Gold Pearson Correlation .874**

1

Sig. (2-tailed) .001

N 10 10

**. Correlation is significant at the 0.01 level (2-tailed).

Correlation coefficient value 0.874 significances the relationship between gold rate and crude oil.

It is because when the value of US dollar devaluates in international market bankers as well as

investors and traders from all over the world hedge against this adversity through investments in

gold.

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Graph 9

USD in INR vs Gold Price in INR

Lowest gold rate was observed in the year 2006= 6255

Highest gold rate was observed in the year 2013= 22240

The graph depicts that gold price has increased many folds from the year 2008 to 2013 it is

because of global recession period from 2008-2009 and many investors invested in gold rather

than US dollar.

Graph20

Trend Analysis of USD exchange rate and Gold Price in INR

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Trend line equation for gold price is Y= 1958.2x-453678

From the trend line for gold we can conclude that on average price of the gold increases by

1958.2 rupees every year. And USD exchange rate value is also increasing on the average of

2.3552 rupees every year

Regression

Hypothesis Assumed (H0): No relationship between USD exchange rate and Gold price.

Alternative Hypothesis (H1): Relationship exist between USD exchange rate and Gold price

Table 27

Variables Entered/Removedb

Model Variables Entered Variables Removed Method

1 USDa . Enter

a. All requested variables entered.

b. Dependent Variable: Gold

Table 28

Model Summary

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .874a .764 .734 3224.26709

a. Predictors: (Constant), USD

Table 29

ANOVAb

Model Sum of Squares df Mean Square F Sig.

1 Regression 2.689E8 1 2.689E8 25.869 .001a

Residual 8.317E7 8 1.040E7

Total 3.521E8 9

a. Predictors: (Constant), USD

b. Dependent Variable: Gold

Table 30

Coefficientsa

Model

Unstandardized Coefficients Standardized Coefficients

t Sig. B Std. Error Beta

1 (Constant) -20260.952 6916.138 -2.930 .019

USD 691.697 135.995 .874 5.086 .001

a. Dependent Variable: Gold

Significant correlation with R=0.874. R square value shows that approximately 80% of variation

in gold prices accounted for with US Dollar value.

Significant linear regression with p value=0.001.

Regression Equation is – Y=691.697 X -20260.952

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Since P-value is <0.05 H0 is rejected, and H1 is accepted. Thus there is exists relationship

between USD exchange rate and Crude oil Price. The negative intercept of t value as well as

negative intercept of regression equation shows the inverse relation between the US dollar and

gold price.

CONCLUSION

This study examines the long-run relationship between US dollar exchange rates and the prices

of five selected agricultural commodities. In the selected five commodities, two commodities

namely Gold and Crude oil share an inverse relationship with US dollar exchange rate. Similarly

out of three selected agricultural commodities, two commodities sugar and potato maintains

negative relationship with US dollar exchange rate whereas Cardamom shares no relation with

US Dollar exchange rate. The findings of the present study support the results of previous

studies, which indicate that the agricultural commodity prices are negatively correlated with the

US dollar exchange rates i.e. commodity price decrease with increasing US Dollar value against

Indian rupee.

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