Canada and Australia – two of the so-called “commodity currencies” – defied the other major currencies by lifting interest rates in 2010. Australia has close ties to China and is an exporter of resources and other commodities with high demand in Asia. This position made it the first country to take rates higher. With a lending rate of 4.75 percent, Australia still has the highest interest rate of the major economies.
Canada also exports resources to China as well as oil and timber shipments to the US. During the summer, the Bank of Canada implemented a series of rate hikes, raising the rate from 0.25 percent to 1 percent in response to stronger-than-expected growth. If inflation once again proves a concern for either of these “commodity currency” countries, a rate hike early in the new year is highly probable.
