Investors have been flocking to the so-called Aznac (Australia and New Zealand) currencies of late, in search of high yields. Australia and New Zealand both currently offer some of the highest interest rates in the industrialized world. Moreover, analysts believe the two central banks will further tighten credit by raising interest rates in the near term. In the past, investors in search of risk-less, stable, returns simply purchased American treasury securities. However, as the USD declines, foreign investors earn negative real returns on the treasuries they hold. As a result, many are beginning to move money to other developed nations, where the risk of default is equally unlikely, but interest rates are higher. The Australian Financial Review Reports:

What looked like the long-awaited rebirth of the US dollar at the start of this year appears to have been a false signal. Investors, starved for yield elsewhere, are responding by recycling out of US dollar-denominated assets.

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