By Tim Seymour
Question: How can commodity currencies withstand the deflation that spot prices in core commodities are enduring?
Answer: Some are not, notably South Africa (EZA) and its obvious linkage to gold, as well as Russia (RSX) with its ties to oil. The ultimate commodity currency, however, has to be the Australian dollar (EWA). While the last couple of days have been worth a -1.2% move, the Australian dollar tested lows of .97 in May/June last year.
Arguably, things are worse with regard to the core global growth story, even though Europe has found a baseline support. The move in gold (GLD) should equal a move to sell the Australian dollar.