Commodity Currencies Sell-Off as Gold and Oil Prices Turn

The Australian, New Zealand and Canadian dollars are all lower across the board. A turn in the commodity markets and liquidation out of these high yielding assets has contributed to the sell-off. Last night, the New Zealand trade surplus turned into a deficit.

As we have warned, the strong level of the Kiwi and weakness in commodity prices (like cattle) has taken a big bite out of exports. Even though there are no more economic data due for release from the region this week, the commodity currencies will be a big focus with Canada set to decide on interest rates. The CD Howe Institute of Canada recommended today that the central bank raise rates by 25bp to 4.50 percent next week. We think that this is unlikely because even though the economy has been performing very well, the central bank will not want to risk spurring more speculation and demand for their currency by raising rates as it would assure the Canadian dollar?s move to parity.