a study on relationship between price of us dollar and ... · rate of indian rupee against us...
TRANSCRIPT
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
International Journal of Pure and Applied Mathematics Special Issue
204
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
205
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
International Journal of Pure and Applied Mathematics Special Issue
207
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.
International Journal of Pure and Applied Mathematics Special Issue
208
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
International Journal of Pure and Applied Mathematics Special Issue
209
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
International Journal of Pure and Applied Mathematics Special Issue
210
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.
International Journal of Pure and Applied Mathematics Special Issue
211
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
International Journal of Pure and Applied Mathematics Special Issue
212
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
International Journal of Pure and Applied Mathematics Special Issue
213
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.
International Journal of Pure and Applied Mathematics Special Issue
214
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
International Journal of Pure and Applied Mathematics Special Issue
215
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
International Journal of Pure and Applied Mathematics Special Issue
216
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.
International Journal of Pure and Applied Mathematics Special Issue
217
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
International Journal of Pure and Applied Mathematics Special Issue
218
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.
International Journal of Pure and Applied Mathematics Special Issue
219
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.
International Journal of Pure and Applied Mathematics Special Issue
220
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
International Journal of Pure and Applied Mathematics Special Issue
221
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
International Journal of Pure and Applied Mathematics Special Issue
222
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.
References 1. Abbott, P. C., C. Hurt, and W. E. Tyner. “What’s driving food prices in 2011?” Farm
Foundation 2011
2. Adrangi, B., Chatrath, A., Raffiee, K.,2003, Economic activity, inflation and hedging:
The case of gold and silver investments, The Journal of Wealth Management 6, 60-77.
3. Anthony N. Rezitis, Empirical analysis of agricultural commodity prices, crude oil prices
and US dollar exchange rates using panel data econometric methods , Journal of Energy
Economics and Policy, 39, 2015
4. Anthony N. Rezitis, The relationship between agricultural commodity prices, crude oil
prices and US dollar exchange rates: a panel VAR approach and causality analysis ,
International Review of Applied Economics
5. Ardian Harri, Lanier Nalley, and Darren Hudson; The Relationship between Oil,
Exchange Rates, and Commodity Prices, Journal of Agricultural and Applied Economics,
(10) (August 2009)
6. R.Rameshkumar “Study On The Optimization Of Solar Assisted Vapour Absorption
Refrigeration System”, International Journal Of Innovations In Scientific And
Engineering Research(Ijiser), Vol 2 Issue 7 Jul 2015 Pp.187-192.
7. Girish Karunakaran ,Nair;Nidhi Choudhary;Harsh Purohit, The Relationship between
Gold Prices and Exchange Value of US Dollar in India. ; ISSN(Emerging Markets
journal (2015),(10)
8. Hidhayathulla A & Mahammad Rafee.B; Relationship between Crude oil price and
Rupee, Dollar Exchange Rate: An Analysis of Preliminary Evidence; IOSR Journal of
Economics and Finance (IOSR-JEF) ;4, (Mar-Apr-2014)
9. Norasyikin Abdullah Fahami ; SharazadHaris; Hasyeilla Abdul Mutalib, An Econometric
Analysis between Commodities and Financial Variables: The Case of Southeast Asia
Countries International Journal of Business and Social Science; (June 2014) .(8)
10. Sankararaman G, Rengarajan V, Natarajan R and Nandhini V, A Study On Performance
Of Select Commodities Due To Demonetisation,, International Journal of Pure and
Applied Mathematics Volume 119 No. 10 2018, 1541-1551(April 2018)
International Journal of Pure and Applied Mathematics Special Issue
223
224