Even as the US Federal Reserve Bank embarked on a second round of ‘quantitative easing’ intended to combat fears of recession, higher than expected inflation figures from China drove the prices of commodities and commodity backed dollars lower as the week ended. In Australia this news was coupled with a negative unemployment report and profit taking after the Australian dollar hit a record high against both the US dollar and the Euro.
Emerging markets have led established markets out of the recession, driving strong demand for raw materials. Stimulus efforts in the US which have depressed the dollar relative to other currencies have further driven up the price of dollar denominated commodities.
As commodity prices have increased, so have the value of commodity currencies relative to the US dollar. The Australian dollar has benefited from this trend during the latter half of the year.
