Abstract
This paper studies the downside tail-risk relationship between currencies and commodities. In order to do so, we use the novel MCoVaR with Elastic-Net of Bonaccolto et al. (2021) to simultaneously account for the potential ties among a large set of commodities. We show that exchange rates are significantly exposed to downside tail-risk with respect to several commodities, including, but not limited to, oil and gold. Additionally, we find that different exchange rates are vulnerable to tail-risk in different commodities. Lastly, the results with respect to gold indicate that the Japanese yen and the Swiss franc can be considered safe-haven assets.
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