By Marc Chandler

NEW YORK ( BBH FX Strategy) -- The recent rally in commodities has been significant. Since late August, the CRB index has rallied about 30%. Roughly one-third of the gain was recorded since late November.

If one is bullish on commodities, one can simply buy those commodities. This is especially true for equity investors given the various exchange-traded funds that are available. At the same time, foreign exchange market participants often look for ways to bet on, or hedge, commodities in the currency markets.

Meanwhile, there is a bit of a debate in the academic world as to whether commodities lead currencies or vice versa. Some work suggests that currencies adjust faster than real activity, and that as a consequence, stronger so-called commodity currencies lead the movement of commodities, rather than the other way around.

We examined the correlation between commodities and currencies using three commodities: gold, oil and copper. We used the following currencies: the Australian dollar (AUD), the New Zealand dollar (NZD), the pound (GBP), the euro (EUR), the yen (JPY), the real (BRL), the krone (NOK), the rand (ZAR), the Mexican peso (MXN), the Chilean peso (CLP) and the Canadian dollar (CAD).

We performed our calculations on percentage change and log normal basis.

Gold: Over the past three and six months, the New Zealand dollar was most correlated with gold prices. In the past three months, the correlation was 0.615. During the same period, the Australian dollar came in No. 2, with a 0.598 correlation. Much to our surprise, we found that the pound was the third most-correlated currency over the past three months, at 0.540. The rand was 0.49 and the Canadian dollar was 0.46. Over the past six months, the rand and real edged out the pound, but the New Zealand dollar and Australian dollar were the most correlated.

Oil: In both periods, the Canadian dollar was the most correlated with oil prices. In the past three months, the Canadian dollar's correlation stood at a high 0.74, while over the past six months it was 0.645. The Australian dollar was in second place, with correlations of 0.635 and 0.615, respectively. The Mexican peso came in third, at 0.556 and 0.55, respectively. Surprisingly, the New Zealand dollar, which came in fourth, at 0.502 and 0.542 respectively, was more correlated to oil than oil producers like the U.K. and Norway.