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The Loonie, the Kiwi, and the Aussie aren’t named “comdolls” for nothing – they earned their titles as commodity dollars because their respective economies are highly dependent on exporting commodities. As such, these currencies tend to have strong correlations with the commodity markets, and they usually move hand in hand with one another.

But lately, this hasn’t been the case – the comdolls have been going their own separate ways. Why aren’t these high-yielding currencies moving in tandem anymore?

Reason 1: Easing Chinese demand

Though all three economies benefit from China‘s appetite for commodities, Australia seems to be the most sensitive to fluctuations in Chinese demand. After all, China is responsible for over a fourth of Australia’s total exports.

Australia and the Aussie found themselves on the receiving end at the peak of China’s boom, but when growth in the world’s second largest economy started to cool down, its demand for Australian goods and the Aussie began to decline as well.

Reason 2: Diverging fundamentals

Australia has been seeing its fair share of disappointing reports as of late, namely in retail trade, the housing market, and in manufacturing production. If you recall, retail sales noted a not-so-merry Christmas in Australia as it showed a 0.2% decline in December. Likewise, the housing market saw losses of its own as building approvals dropped 4.4% in the same month.

Meanwhile, the AIG manufacturing index continues to indicate contraction in Australia’s manufacturing industry, most recently printing a reading of 40.2 for the month of January. Take note, this report hasn’t seen a reading above 50.0 (which is indicative of growth) since February of last year.

Canada has also been showing signs of struggle, as employment levels recently dropped by 21,900 last month. It also shares the same sore spots as Australia – building permits dropped by a whopping 11.2% in December, just as manufacturing sales declined 3.1%.

But while these two countries have been having a rough time, New Zealand seems to be holding up quite well. Demand for its top exports, wheat and dairy, is still strong and has been contributing to economic growth in the country. Even the retail sector has been seeing improvements – it recently clocked in a growth of 2.1% in Q4 2012, surpassing forecasts for a 1.3% increase. No wonder business confidence is at a one-year high!

Reason 3: Differing takes on monetary policy

As I mentioned last week, market participants have started to price in an RBA rate cut following the series of negative reports from the Land Down Under. It also does not help that Australian policymakers have been very vocal about their discomfort with the Aussie’s strength.

The minutes of the central bank’s latest meeting confirms that further easing could be in the cards. The report’s main takeaway is that the housing market has benefitted from the latest rounds of rate cuts. With inflation still being tame, there could still be more room for easing. Does this mean there’s more room for AUD/USD to trade lower too?

On the other hand, policymakers in Canada as well as in New Zealand are seeing the positive side of having strong currencies.

In one of his most recent speeches, BOC Governor Mark Carney didn’t seem to sound at all worried about the Loonie. He credited its recent gains to a number of factors that include the central bank’s credibility and a healthy banking sector in Canada.

Heck, he even cited that the strong exchange rate is advantageous to Canada since it makes importing machinery, equipment and information and communications technology cheaper. New Zealand Prime Minister John Key seems to share the same sentiments. He reportedly said that consumers in New Zealand actually benefit from the Kiwi’s recent strong rally!

If economic reports from Canada and New Zealand come in better-than-expected this coming week, speculations that the two economies can handle higher currencies would be confirmed.

I wouldn’t be surprised to see USD/CAD find resistance at the top of the rising channel or NZD/USD tap new highs and maybe even rally past .8500.

USD/CAD Daily Chart

NZD/USD Daily Chart