We've discussed some of the specific factors that can affect a currency's value, interest rates, for instance, or inflation rates or the public debt, number of different factors. One I did not mention was the terms of trade and here, I'd like to discuss the special case of commodity currencies. These are currencies that belong to countries where a particular commodity is very important, particularly in the export sector of that country. And what we find is that the currency, the commodity currency, tends to follow the price of the commodity on international markets. Okay? This maybe doesn't make sense to you because you know that all commodities or most commodities are traded in U.S. dollars. You might say, why would the Russian ruble be affected by the price of petroleum if petroleum is traded in U.S. dollars? Well, just imagine that the price of petroleum is very, very high. And Russia is exporting petroleum and it is receiving from those exports U.S. dollars. Now what it needs to do with those U.S. dollars is exchange them for rubles. So, again, thinking of your supply and demand diagram, as it brings in a larger volume of U.S. dollars and buys Russian rubles with it, the demand curve for Russian rubles moves out to the right and the ruble rises in value. So, if the commodity is important in the country, this is almost an automatic effect. I want you to see some examples of this. I've got several charts where you can observe what's happening in countries that have commodity currencies. The first chart, you can see Australia, Burundi, Mali and, Togo, and you can see their particular dominant commodity. You see its price and then you see the real exchange rate. Now here, we're entering now into a little of the difficulty I wanted to avoid earlier because I didn't want to use the word exchange rate in a dynamic sense. So, just suffice it to say they're kind of flipping this around. All right? You'll see some of the other charts look different and I'll explain it to you. But you're seeing that the currency is falling in value as the commodity price declines. In the second slide, you're seeing the Russian ruble. Here, you see three lines. I'm mostly interested in the one that goes down which is the oil price and the one that turns up which is the number of rubles you have to pay for a U.S. dollar. Okay? And you can see that this represents a weakness of the ruble. So, it is actually following the decline in oil prices. The next slide shows the Canadian dollar and we can also see this effect even though Canada is a big developed diversified economy. Exports of petroleum are very important and they influence the value of the Canadian dollar. And then in the next slide, you can see the Nigerian naira. Here, I did not put the oil price but you can see the months of 2014. We know that oil prices began to decline at the end of 2014 suddenly. And you see the sudden change in the value of the naira. Again, this is a picture of how many naira it takes to buy a dollar. And in the last slide, you can see a group of countries. Again, we see Nigeria and then we've got Saudi Arabia, Norway, Kazakhstan, Brazil, and Russia. And, again, you can observe how their currencies all follow the price of oil which is also in the graph. So, there are special cases for countries that have important commodity exports and have commodity currencies. There's also a special case in currency values that refers to the countries whose currencies are seen as a reserve currency, a hard currency, a safe haven currency. Now, these are not necessarily perfect synonyms for each other but the idea is that the country has a currency that other countries are happy to hold as a store of value and that outside investors are happy to hold as a store of value because they have faith in that country. They believe that its currency will hold its value and therefore they prefer it to others. And I just have a couple of slides here so you can observe how important the U.S. dollar is in this category. The first one shows, well, both of them show the U.S. dollar as a part of the composition of international reserves. The first one shows just the latest figure. You can see the U.S. dollar absolutely predominating over any other currency as the preferred reserve currency in the world. And you see the other currencies beside it with much smaller amounts. The second graph shows the same situation over time. So you can see the U.S. dollar as the world's reserve currency varying between 60% and 70% of all reserves in the world. No other currency even comes close. We have the euro, the closest one, but it's around the 20% to 30% mark. So, these currencies, the commodity currencies, the U.S. dollar, some other currencies, are perceived as safe haven. Sometimes it's the Swiss franc. Sometimes it would be one of the Scandinavian currencies. These currencies will tend to either hold their value more than others. So, they tend to be stronger than what the other indicators would show that they should be or, in the case of commodity currencies, if the commodity price falls, that will predominate over all of the other indicators that we've just described in determining its value.