In yesterday’s screencast we discussed the method by which the Federal Reserve can affect relative asset prices.  Today we take a look a country is the flip side of what is happening here in the US.  In Australia the central bank is in the midst of a concerted effort to raise interest rates.  Last night the Reserve Bank of Australia raised short term interest rates another 25 bp to 4.75%.  Robust commodity markets and a booming housing market have been examples of strength in the Australian economy.  Clearly the central bank can’t much affect the global commodities market, but it can raise the cost of housing finance.  The case of Australia and the persistent strength in its currency highlights the benefits to investors to taking a global view.  Even when the local economy is in a state of disrepair, like the US, there is always the potential to find a bull market elsewhere.  Eventually the Australian economy will slow, but for now investors are willing to overlook the RBA’s intentions.  In today’s screencast the case of Australia where their central bank is attempting to put on the monetary brakes.

Items mentioned in the above screencast:

Australia and India raise rates to cool inflation.  (Bloomberg)

Australia is one of the “clear standout economies.”  (WSJ)

A number Asian countries are raising interest rates.  (FT Alphaville)

The Australian dollar hits parity with the US dollar.  (Street Sweep)

Inflationary pressures are brewing.  (Money Game)

Higher interest rates are beginning to affect the Australian housing market.  (Data Diary)

Weekly charts of the CurrencyShares Australian Dollar ETF (FXA) and the iShares MSCI Australian Index ETF (EWA).  (Finviz, ibid)