Central Bank Diversification Into Commodity Currencies Continues

Central Bankers are conservative by nature so it comes as no surprise that they would act to diversify their reserves. When you are faced with too many USD and terrible US monetary and fiscal policy, you have to find ways to reduce your exposure. Just last month, Bank of Israel Governor Stanley Fischer said that Israel was diversifying into currencies "we would never have put in the reserves before, including the Australian dollar".

As you can see from the chart, the AUD, NZD, and CAD are all up against the USD over the last 6 months. The fact that the commodity-linked currencies have solid fundamentals and higher interest rates is just a bonus. Read more about this topic here.