EURUSD does not correlate quite as well as AUDUSD, as you can test for yourself. So, it’s not just the dollar decline. Australia is a major producer of commodities and their population is relatively low so a lot of their stuff is exported.
There are at least three ways of thinking about it –
* Bank of Australia causes the appreciation of the Aussie, higher export prices translate into higher commodity prices around the world.
* commodity bubble drives up profits of Australian farmers, creating inflation, Bank of Australia is forced to appreciate their currency to combat inflation.
* the same speculators who created the commodity bubble also invest large amounts of money into AUD, thinking (for example) that a high-yield commodity-driven currency would better withstand current crisis than the dollar or the yen.
