The Australian exchange-traded fund (ETF) iShares MSCI Australia Index (EWA) has rebounded sharply lately. Some of the factors behind its increase include the resilient Aussie dollar that has reached new highs and steady performances by top holdings such as BHP, which is an industry leader in major commodity businesses, such as aluminum, coal and gas. Year-to-date, EWA is up 40.7% and CurrencyShares Australian Dollar Trust (FXA) is up 19.3%.

The Australian dollar reached a 23-year high against the U.S. dollar last week, and some commentators have predicted it could become equal to the dollar in the coming months because of unprecedented prices for coal and iron ore, reports Wes Goodman for Bloomberg News. Part of the demand for the currency comes from the carry trade, which is where investors borrow low-interest currencies such as the Japanese yen and invest in higher yielding currencies such as the Aussie and New Zealand dollar, says Carl Delfeld for ETF XRAY. BHP, the company with the largest weighting in the ETF basket, recently reported huge new exploration opportunities.

Australia’s economy is doing so well that some experts say it’s healthier than the U.S. The International Monetary Fund (IMF) backed that theory up on Sept. 13 when it raised its forecast for economic growth in 2007 to 4.4%, up from 2.6% in April. That’s the fastest increase since 2003 for Australia. In contrast, the IMF predicts the U.S. economy might expand by 2%.

Read the disclosure, as Tom Lydon is a board member of Rydex Investments.

Tags: Australia, Coal, Commodity ETFs, Currency ETFs, New Zealand Dollar