Key Takeaways
Commodity-linked currencies from Norway, Australia, and Canada are outperforming larger rivals, with the Norwegian crown and Australian dollar gaining over 7 percent against the US dollar this year as geopolitical conflicts reshape global energy and materials markets.
"The strategic and geopolitical focus on commodities has yet to be priced into these four commodity currencies," Manish Kabra, multi-asset strategist at Societe Generale, said. Kabra noted his firm has been reducing exposure to the euro while increasing its weight in the four commodity currencies since the conflict in the Middle East began.
The pivot comes as the broad commodity complex has returned 42 percent year-to-date, a sharp acceleration from last year's 6 percent gain, BofA research shows. Oil is trading near $100 a barrel and copper has reached six-week peaks, while gold remains up roughly 50 percent from a year ago despite a recent retreat.
This shift reflects an increasingly fragmented global order where nations are prioritizing energy security and access to critical materials for the green transition and AI buildout. This has positioned stable, AAA-rated energy exporters like Norway and Canada as new safe havens for investors concerned about the US dollar's status.
As a major oil and gas producer, Norway has become a linchpin of Europe's energy security, particularly as the continent weans itself from Russian supply. Lauren van Biljon, a senior portfolio manager at Allspring Global Investments, said she had recently moved to a long position on Norway's crown against the British pound, citing both the commodity pivot and expectations of a hawkish Norwegian central bank.
"Australia, Canada and Norway boast both AAA-rated sovereign debt and net energy-exporter status," analysts said. This combination offers a credible alternative for investors looking beyond the euro and yuan.
The commodity currencies are not without vulnerabilities. A significant escalation of the war that hits global economic growth could hurt their appeal, and the US dollar's role as the ultimate safe haven has dented their performance in recent weeks.
Mining powerhouse Australia, a major net exporter of coal and liquefied natural gas, is also reliant on imports for refined oil products. "Most important in the here and now is energy independence and energy security," said Malin Rosengren, a portfolio manager at RBC BlueBay Asset Management, noting Australia as vulnerable on this front.
Even if the Middle East conflict is resolved, energy costs are expected to remain elevated. "If the oil prices are $85 to $100 instead of $65, then energy exporters in politically stable countries, if you consider Norway and Canada in that camp, should do better," said Van Luu, global head of solutions strategy at Russell Investments.
Andreas Koenig, head of global FX at Amundi, noted that while global turmoil has thrust them into the spotlight, the currencies are also poised to benefit from a return to stability. "They are still high beta currencies, and they profit from risk on," he said.
This article is for informational purposes only and does not constitute investment advice.
