Why the Aussie is a stagflation haven?

Risk assets are falling, and in the short term there are decent arguments that it's time for a rally within the bear market. But how best to deploy assets for the longer term?

We now have three central scenarios ahead of us:
Soft landing: The central banks succeed in bringing inflation under control and keepingthe labor market strong,while growth slows down a bit but never dips into a recession.

Recession: The Fed's tightening squeezes the life out of the economy swiftly, even as it brings inflation under control. As a result, rates don't rise as much as feared, and instead central banks have to pivot yet again and start easing.

Stagflation: Inflation keeps rising despite central banks' best efforts, and that means rates also keep rising. Inflation combines with higher rates to destroy demand, so the economy submerges.

Rather than go into the details of which scenario is most likely, it's best to look at what opportunities the market is offering at present. If you're concerned by the stagflation risk, and at least want to take out some insurance against it, now would be a good time.

In the scenario of stagflation, then commodity prices will keep rising, by definition. In that case, one of the purest ways to take advantage is through the dollars of Australia and Canada, two well-run economies backed by plentiful raw materials.

During the last commodity bull market, the US dollar lost much ground to both; this time around, neither currency has strengthened as much as might be expected with materials prices rising. Currencies have the advantage that they are a zero-sum game. Whatever happens to the economy, a currency trade will always make money, if you take the right side. So this seems a reasonably straightforward way to get on the right side of stagflation: