As you probably know, interest rates drive currencies. Money tends to flow towards high-yielding countries, and away from low-yielding currencies. So when central bankers announce rate decisions, currency traders are right there, waiting for the latest results.

And last week was nothing but rate announcements.

For starters, Australia was the one major economy that dared to raise interest rates in this market. That puts the Aussies in a class of their own right now.

The Bank of Canada surprisingly cut rates by 50 basis points which was 25 more points than expected. Boy, that new central banker there doesn’t mess around. This was his first interest rate decision to make. What a way to start…

New Zealand just kept rates on hold. However, they have the “highest rates in the land” when it comes to the major economies. So New Zealand interest rates are still at an “eye popping” 8.25%.

Next week, we’ll get the interest rate decision from the U.S. Fed. Many are expecting Bernanke to lop off as much as 75 basis points.

Of course, Bernanke doesn’t have much of a choice. He’s facing a very difficult situation. He’s trying to avoid economic landmines like the U.S. stagnating growth along and rising inflation (especially food and energy/commodity inflation).

I’m watching one currency pair right now that’s managed to dodge all these disasters. It’s the Aussie vs. the Canadian dollar (AUD/CAD).

As I said, the Aussie has raised rates and will raise rates again sometime in the future IF inflation continues on its fast pace higher. The Bank of Canada cut more than expected and has already said they may have to cut rates further. (I like this new Central Banker so far. He speaks in plain English and not in “code” and tells you what he’s thinking.)

So therefore, over time, the rate differential will work in Australia’s favor and away from Canada. It also doesn’t hurt that gold is outpacing oil on its way up. Since Australia exports tons of gold and Canada exports “tons” of oil…this works in Aussie’s edge over Canada as well.

But it doesn’t stop there. Australia has a tighter labor market, including more demand placed on it from China. Plus wages are high. So it looks like things will continue to boom in “the land down under.”