Examine a list of the top-performing funds in the last month, and you’ll find it lousy with base and industrial metals. [Metals and Mining ETF Outlook.]

Among the funds showing the most strength in recent weeks include:

• SPDR S&P Metals & Mining (NYSEArca: XME), up 23.1% in the last month

• Market Vectors Steel (NYSEArca: SLX), up 20.2%

• iPath DJ AIG Copper (NYSEArca: JJC), up 18.8%

• Market Vectors Coal (NYSEArca: KOL), up 18.4%

Even iShares MSCI Australia (NYSEArca: EWA), a proxy for basic materials if there ever was one, has gone gangbusters in the last month, shooting up 15%.

What gives?

• Some risk appetite is returning. Greece still has no clear resolution to its crisis, but assurances that a deal is close has lured more investors to come out and play. [9 ETFs for Dollar Bears and Bulls.]
• Emerging markets, as usual. China, especially, has led the drive to consume copious amounts of copper and steel. But don’t forget other emerging markets. India, Brazil, South Africa, Egypt and others are in various stages of amassing raw materials to support their growth efforts. [China's Buying Spree.]
• Supply and demand. Mother nature has crimped Chile’s efforts at mining and producing copper. While the country’s miners are mostly back and running, aftershocks could threaten progress. China is rabidly consuming coal and iron ore, but they’re two of the commodities in shortest supply. [The Outlook for Coal and Steel.]

For full disclosure, Tom Lydon’s clients own shares of EWA and XME.

While the unemployment rate held steady at 9.7% and 36,000 jobs were lost in February, the number of jobs the economy shed was far less than what economists had been expecting. The impact of the snowstorms on the East Coast may have had a small impact on the final figures, but the Labor Department wouldn’t say how much.

The jobs report quickly had an impact on other areas of the market, primarily easing investors’ fears and encouraging them to take on more risk. That, combined with reassurance from China’s premier that the country would stick to a looser monetary stance, helped boost copper prices by more than 3%. Concerns about China’s demand for metals has weighed on investors, but those fears may be unfounded, as China still intends to be a major consumer of metals. iPath DJ-UBS Copper TR Sub-Index ETN (NYSEArca: JJC) is up nearly 2% this morning. [Your Guide to Investing in Metals ETFs.]

High-yielding currencies are also leading the charge in the markets this morning, with the dollar gaining ground on the yen and dipping against the euro and other higher-yielding currencies, such as the Australian Dollar. Greece woes are keeping the euro’s gains tempered, though. CurrencyShares Australian Dollar Trust (FXA) is up about 0.6% this morning; the WisdomTree Dreyfus Euro (NYSEArca: EU) is flat. [Read Our Currency ETF Special Report.]

Read the disclaimer, as Tom Lydon is a board member of Rydex|SGI.

Australia’s Central Bank Governor Glenn Stevens boosted the overnight cash rate target to 4% from 3.75%, reports Jacob Greber for BusinessWeek. The news strengthened the Australian dollar against a basket of currencies, and brought the Aussie to a 25-year high against the British pound. [Australia ETF: Steady Growth, But Is Inflation Too Low?]

Looking at the numbers, it’s easy to see where the confidence comes from:

• The Central Bank predicts that a rebound in consumer confidence, greater business optimism, higher housing prices, drop in unemployment and signs of an investment boom will further aid the Australian economy.
• Retail sales increased 1.2% in January from December, more than twice the gain expected by economists.
• Australia’s company gross operating profits increased by 2.2% in the fourth quarter of 2009 from the previous quarter, reports James Glynn for The Wall Street Journal. New home sales jumped 9.5% in January from December.
• The Australian Industry Group-PricewaterhouseCoopers Australian Performance of Manufacturing Index rose 2.8 points to 53.8% in February from January. Anything above 50.0 indicates an expansion.
• The TD-Securities/Melbourne Institute Monthly Inflation Gauge increased 0.1% in February from January, and so far this year, the inflation gauge rose 1.9%.

As with any economy, there are roadblocks to watch. According to Netherlands Authority for Financial Markets chairman Hans Hoogervorsttold, the excessive debt taken on by governments around the world may eventually hurt Australia’s economy, writes Lucy Battersby for The Sydney Morning Herald. For example, the stimulus programs in Asian countries will eventually be wound down and demand for Australian resources will start to recede.

On the other hand, Asian economies may exercise caution in unwinding their various stimulus efforts. Doing so will help ensure that the rug isn’t just being pulled out from under any recovery.

For more information on Australia, visit our Australia category.

• iShares MSCI Australia (NYSEArca: EWA)

• WisdomTree Pacific ex-Japan Equity Income Fund (NYSEArca: DNH): Australia is 81.7%

• PowerShares FTSE RAFI Asia Pacific ex-Japan (NYSEArca: PAF): Australia is 72.2%

• Currency Shares Australian Dollar Turst (NYSEArca: FXA)

For full disclosure, Tom Lydon’s clients own shares of EWA.

Read the disclaimer; Tom Lydon is a board member of Rydex|SGI.

Max Chen contributed to this article.

Greece may have scared up an additional $6.5 billion in deficit cuts, which may be announced tomorrow. The European Union amped on the pressure on the economy in order to head off a eurozone-wide contagion effect. The new measures reportedly will include higher tobacco, alcohol and sales taxes and deeper cuts in public workers’ bonus payments.

U.S. auto sales are making a comeback, although GM’s gains didn’t exactly thrill analysts, who were expecting more. Ford (NYSE: F) was the big winner, seeing a 43% sales surge last month. It was the first time since 1998 that Ford’s deliveries bested GM’s, which rose 12%. SPDR S&P International Consumer Discretionary Sector (NYSEArca: IPD), which holds a number of automakers, is up 0.6% so far today. [Play Auto's Rebound With This ETF.]

Joblessness in Japan dipped below 5% today and the availability of jobs has risen. It’s taken as a sign that improving exports and output are fueling the necessary economic growth. But don’t get too excited; analysts still feel that a recovery will be slow. iShares MSCI Japan (NYSEArca: EWJ) is up about 0.6% so far today. [3 Things Japan ETF Needs Now.]

Australia hiked interest rates again for the fourth time since October as the economic recovery in the nation deepens. The Reserve Bank of Australia raised its key cash rate by a quarter of a percentage point to 4%, rounding out the total rate rise to 1%. iShares MSCI Australia (NYSEArca: EWA) is up nearly 1% this morning. [Australia ETF: Steady Growth.]

For more stories about Australia, visit our Australia category.

According to Central Bank official Philip Lowe, Australia is in a much better position than other advanced nations, benefiting from growing employment numbers, high investment levels and high commodity prices, reports Jacob Greber for BusinessWeek.

Signs of an economic recovery have pushed policy makers to increase borrowing costs last year. But, the Reserve Bank of Australia (RBA) is keeping interest rates unchanged this month amid concern that the European sovereign-debt issue may enervate the global recovery.

The Central bank aims to keep inflation between 2% and 3%. The bank estimates inflation will rise to around 2.5% this year and “just a little higher” next year.

The International Monetary Fund (IMF) suggested that the RBA may consider lifting inflation targets to 4%, but RBA Treasurer Wayne Swan countered in saying that any weakening of the official commitment to keep inflation low will make it harder for the bank to get underlying price growth back into the target zone, reports Michael Stutchbury for The Australian. The IMF argues that higher inflation provides “improved maneuverability” for Central Banks when they are affected by events like another financial crisis, a pandemic or a terror attack. [Commodities and IMF Give Australia a Lift.]

The Australian index of leading economic indicators increased 0.5% to 256.4 in December, the highest point in more than a year, writes Jacob Greber for BusinessWeek. The Westpac leading index tracks eight gauges, including company profits and productivity, to provide a measure of how the economy will do over the next three to nine months. The coincident index, a measure of the state of the economy, rose by 0.4% to 245.8 in December.

For more information on Australia, visit our Australia category.

• iShares MSCI Australia (NYSEArca: EWA)

Max Chen contributed to this article.

The diamond market is very volatile. Since global diamond production is declining and prospects of finding new mines are slim, this may lead to a solid reason that a diamond ETF may be just what the gem market needs. If you can’t wait for a diamond ETF, there are indirect ways to get diamond exposure:

• iShares S&P Global Materials (NYSEArca: MXI)

• iShares MSCI Australia Index (NYSEArca: EWA)

Another aspect that the diamond industry has going for it is the widening middle class in China, India and other emerging markets. Kevin Grewal for The Street explains that some analysts and diamond experts suggest that valuations of diamond stocks appear to be relatively cheap. [Where Is that Diamond ETF?]

Meanwhile, the rough diamond market is showing signs of rebounding and if investors are cooperative in financing diamond mining and exploration, the industry could begin to sparkle.

For more stories about diamonds, visit our diamonds category.

China should demand enough commodities from Australia to prompt more growth this year than was previously forecast. Jacob Greber for Bloomberg reports that the IMF says gross domestic product (GDP) will expand 2.5% in 2010 and 3% next year. [Why Asia's health is affecting Australia.]

Enda Curren for The Wall Street Journal reports that an upswing in Australia’s economy is well under way. As a result, the Reserve Bank of Australia will focus on a likely build-up of inflationary pressures as demand outstrips supply in major sectors of the economy.

The consumer price index rose 0.5% in the fourth quarter from the previous quarter, slowing from a 1.0% rise in the third quarter. Strong data and healthy retail sales are a key point in whether or not the banks will raise the key lending rate another 0.25%, which is expected next week. [Read about other rate hikes here.]

One big worry if such a rate hike does come to pass is the impact it could have on consumers. Australia’s largest retailer, Woolworth’s, spoke out to say that 2010 will be “a challenging year” as the country balances consumer concerns and economic recovery, report Jacob Greber and Rob Fenner for Bloomberg.

For more stories about Australia, visit our Australia category.

• iShares MSCI Australia (NYSEArca: EWA)

According to the 2010 Index of Economic Freedom released by the Heritage Foundation and The Wall Street Journal, Asia and Asia-Pacific countries have some of the highest levels of “economic freedom,” with Hong Kong in first place, followed by Singapore, Australia and New Zealand, writes Terry Miller for The Wall Street Journal.

• iShares MSCI Hong Kong Index (NYSEArca: EWH)
• iShares MSCI Singapore Index (NYSEArca: EWS)
• iShares MSCI Australia (NYSEArca: EWA)

China, though, experienced diminished economic freedom after the financial crisis. [China is opening up its markets.] South Korea and Japan have maintained or expanded their economic freedom.

• SPDR S&P China (NYSEArca: GXC)
• iShares FTSE Xinhua/China 25 Index (NYSEArca: FXI)
• iShares MSCI South Korea (NYSEArca: EWY)
• iShares MSCI Japan (NYSEArca: EWJ)

Why is economic freedom so crucial? Countries with greater economic freedom have continued to liberalize their economies, allowing entrepreneurs and consumers greater opportunities to grow and prosper.

Historical trends have shown that there is a strong correlation between economic freedom and prosperity. Economically freer countries have higher per-capita incomes on average as compared to those less free economies. Furthermore, economic freedom provides better overall quality of life, more stable political and social conditions, and higher protection of the environment. Freer economies also tend to have a lower poverty rate than those with highly regulated economies.

It should be no surprise, then, that Asia is predicted to lead the world in economic growth this year. The United Nations predicts that while the global growth rate will be about 2.4%, East Asia will grow 6.7% and South Asia will clock in at 5.5%, reports Voice of America.

For more information on Asia, visit our Asia category.

Max Chen contributed to this article.

BRIC countries  have been given a lot of press lately, but there are other interesting things taking place outside of the four economies, primarily in a group of countries categorized as the “MAVINS,” according to the ETFDesk Daily. [The BRIC economies today.]

While they’re not all emerging markets, one thing they all bring to the table is potential, thanks to strengthening economies and increasing growth potential.

Just who are these people, and why should we be paying attention?

Mexico. The country has a growing middle class and a positive population growth trajectory. Observers believe that the close proximity to the United States will allow Mexico’s government to basically become an extension of the U.S. economy and rapidly allow Mexico to close its income gap with us. Furthermore, Mexico is also a commodities play. The country is the world’s seventh largest oil producer, as well as a large exporter of silver, fruits, cotton and coffee. [The key to Mexico's success.]

• iShares MSCI Mexico Investable Mkt Idx (NYSEArca: EWW)

Sector Allocations: Telecommunications Services, 35.2%; Consumer Staples, 22.8%; Materials, 13.6%; Consumer Discretionary, 12.7%; Industrials, 9.1%.

Australia. Australia is the richest commodities source in the world and it basically backs Chinese growth. China is Australia’s largest trading partner and is also a major investor of farmland and real estate in Australia. Additionally, the country has a well-developed manufacturing and services economy. The only problems that hold the country back are its water shortages and lower population per area of land. As the U.S. dollar appreciates, however, it could put more pressure on the carry trade and the Australian ETF.

• iShares MSCI Australia (NYSEArca: EWA)

Sector Allocations: Financials, 43.6%; Materials, 26.3%; Consumer Staples, 10%; Energy, 6.8%; Industrials, 4.5%; Health Care, 3%; Consumer Discretionary, 2.2%.

Vietnam. Vietnam has a quickly liberalizing economy, near-term political stability and a centralized command of a communist government. The country has a rich farm lands and it is developing its manufacturing sector. The population in Vietnam is already larger than that of France or Germany, and population growth is on an upward trajectory. Vietnam shares a lot of economic similarities to the China of 20 years past, such as the much lower labor costs that will make it a manufacturing contender. [Vietnam on track for growth.]

• Market Vectors Vietnam (NYSEArca: VNM)

Sector allocations: Financials, 44%; Energy, 24.2%; Industrials, 15.7%; Materials, 7.4%; Consumer Discretionary, 2.5%; Utilities, 2.3%; Consumer Staples, 1.6%.

Indonesia. The newly Democratic nation is becoming a fast-growing Asian economy. The average standard of living is still low, but that only means that the potential is that much greater. For instance, if Indonesia’s economy were on par with Mexico’s, it would be three times its current size. Indonesia is also rich in oil, gas, coal, tin, copper, silver and gold. Conveniently situated next to India and China, Indonesia is becoming a marginal supplier of natural resources to its increasingly insatiable neighbors. [Indonesia among the year's best.]

• Market Vectors Indonesia ETF (NYSEArca: IDX)

Sector allocations: Financials, 25.2%; Materials, 23.1%; Energy, 14.6%; Consumer Staples, 12.5%; Consumer Discretionary, 10.9%.

Nigeria. Nigeria is the most populous country in Africa, with 155 million people, and it is expected to maintain a high birth rate through 2050. The country is growing and starting to liberalize its economy, having only just come into a Democracy. Some have argued, however, that Nigeria is heavily dependent on its rich oil reserves. Corruption is still rampant and there are some ethnic and religious conflicts. [Recovery in Africa ETFs.]

• There is no Nigeria country-specific ETF, but an investor may gain exposure to the region through Market Vectors Africa ETF (NYSEArca: AFK) – Nigeria is around 22%.

Sector allocations: Banking, 27.9%; Basic Resources, 19.7%; Telecommunications, 12.2%; Oil & Gas, 11.5%.

South Africa. South Africa is the strongest African economy, with modern institutes and commodity wealth such as gold, platinum, coal and diamonds. The economy is diversified with mining, agriculture, services, and manufacturing. Furthermore, South Africa is benefiting from its commodities advantage. Still, half the country lives below the poverty line. [South Africa, a return to normalcy?]

• iShares MSCI South Africa Index Fund (NYSEArca: EZA)

Sector allocations: Materials, 27.8%; Financials, 26%; Telecommunication Services, 12.9%; Consumer Discretionary, 11.4%; Energy, 10.5%.

Max Chen contributed to this article.

It was a down year for the U.S. dollar. As economic conditions shift, investors are putting the currency under the microscope in an effort to determine what’s next. Ben Levisohn for BusinessWeek believes that in 2010 the dollar will be center stage again—only this time it will be a highly volatile greenback that challenges investors.

The most recent roller coaster ride was a small dose of what may be on tap for next year. In just a few days, the Dubai World fiasco and the Greek sovereign debt downgrade drove investors to seek refuge in the recently scorned dollar. U.S. treasuries were snapped up, the euro slumped, and the dollar rose 2.5%.

Besides dollar-focused ETFs, there are other ways to play the movements in the U.S. dollar. Sam Subramanian for Seeking Alpha gives some alternatives:

• Gold: The classic hedge to the U.S. dollar, gold is experiencing record highs and lots of attention. SPDR Gold Shares (NYSEArca: GLD) has profited from the spike in interest and the haven-like quality of the metal. However, gold’s upside potential can be limited if the U. S. economy cooperates and renders the Fed’s job easier. If short-term rates are going to increase, even a relatively large hike in fed funds, say 1%, would still keep rates within Chairman Ben Bernanke’s “exceptionally low levels,” explains ETF Desk forSeeking Alpha.
• International Bond Funds: International bonds offer foreign currency exposure, geographic diversification, current income and potential for capital gains. Generally, individual investors are not equipped to analyze individual international bonds, so seeking an advisor’s help may be necessary. Check out SPDR Barclays Interntational Treasury Bond (NYSEArca:BWX).
• International Stocks and Funds: One can profit from a decline in the  U.S. dollar by investing a portion of the portfolio in well-managed, natural resource economies such as Australia and Canada. Natural resources like oil and base metals are priced in U. S. dollars and often rise in price when the dollar declines. iShares MSCI Australia (NYSEArca: EWA) and iShares MSCI Canada (NYSEArca: EWC).

Direct ways to play the U.S. dollar:

• PowerShares U.S. Dollar Bullish (NYSEArca: UUP)
  
• PowerShares U.S. Dollar Bearish (NYSEArca: UDN)

For more stories about currency ETFs, visit our currency ETF category.