For the last three months, commodity prices have risen steadily, buoyed by the promise that the world's major central banks would ease monetary policy sufficiently to keep the global economy on track.
But now commodity prices are falling back, disappointed that the monetary easing that has taken place, by the U.S. Federal Reserve, the Bank of Japan and the European Central Bank, will have limited impact.
In the meantime, there is little assurance that the People's Bank of China, which for the Aussie is probably the most important major central bank, is about to ease its policy just yet.
As investors reassess their outlook for the global economy and the appetite for risky assets is once again set adrift, the Aussie is finding itself attacked on at least three sides: by falling commodity prices, declining Australian interest rates and a loss of interest in 'high-beta' currencies.
For a country whose economic growth has been buoyed for the last year or more by its mining industry, the prospect of lower commodity prices is hardly good news.
In the U.S., the Fed's decision to prescribe another unlimited dose of quantitative easing has failed to lift growth forecasts ahead of the 'fiscal cliff' faced by taxpayers early next year.
Similarly, in the euro zone, the ECB's bond-buying program designed to lower the borrowing costs of hard-pressed sovereign debtors is failing to have the impact that was initially expected. Not only does this mean that any bond buying might be delayed but that the debt crisis rumbles on and continues to undermine investor confidence.
But it is China that really casts the pall over the Aussie.
Despite the recent economic slowdown, the People's Bank of China has shown little enthusiasm for more easing of monetary conditions. If anything, the central bank's decision to sell a large amount of reverse repurchase agreements this week, the largest operation of its kind since 2004, suggests that the central bank isn't about to cut the reserve requirements for banks as had been expected.
As expectations of more policy easing by the Chinese dies down, the prices of commodities, and the closely-correlated Aussie dollar, could fall even further.
Although the Reserve Bank of Australia published a fairly upbeat Financial Stability Review earlier Tuesday, there is still speculation that the RBA will cut rates by another half a percentage point this year and that Australia's major banks could prove more at risk if the country's housing market starts to fall.
In other words, Australia will find that it is no longer as immune to the global financial crisis as it once appeared to be, and the Aussie will start losing some of the support that has kept it buoyant for most of this year.
If investors lose their appetite for risky assets, as they appear to be doing now, the currency could rack up even heavier losses as Australia starts to lose its attraction.
(This is an opinion column by Nicholas Hastings, who is a Senior Correspondent in London for Dow Jones Newswires and has written about foreign exchange for more than 20 years. He previously covered a variety of markets, including equities, fixed income, commodities and energy. He can be contacted on +44-20-7842-9493, by email at nick.hastings@dowjones.com or on Twitter @NickHastingsDJ)
