--Clyde Russell is a Reuters columnist. The views expressed are his own.--
LAUNCESTON, Australia (Sept 15): The pressing problem for some resource-rich countries isn't that prices for commodities have dropped sharply, it's that their currencies haven't dropped in tandem.
The plight of Australia and Indonesia, the major commodity exporters in the Asia-Pacific region, is driven home by the fact that their currencies have actually gained against the U.S. dollar this year, even as commodity prices have plunged.
This is a body blow to earnings in those countries and defies both economic logic and precedent, which should have seen the Australian dollar and Indonesian rupiah start to drop as revenue from resource exports declined.
While the Australian dollar did slip almost 4 U.S. cents last week to trade around 90 cents early on Monday, it is still stronger than it was at the end of last year, when it fetched 89.03 cents.
In contrast, Australia's two major export earners, iron ore and coal, have dropped dramatically.
Spot Asian iron ore <.IO62-CNI=SI> has fallen 39 percent so far this year, hitting $82 a tonne on Sept. 12, a five-year low.
Thermal coal at Australia's Newcastle Port, an Asian benchmark, dropped to $66.07 a tonne in the week ended Sept. 5, a five-year low and down 23 percent from the start of the year.
What is clear is that commodity currencies have failed to respond this year to weaker commodity prices in the way they did in the 2008 global recession.
When Newcastle coal dropped from its record high of $194.79 a tonne in July 2008 to $60.30 by March 2009, the Australian dollar dropped from 97 cents to near to 60 cents between July and October 2008.
However, as coal and iron ore prices recovered, the Australian dollar rallied with them.
Coal more than doubled from its 2009 low to reach $136.30 a tonne by January 2011, while iron ore went from $59.50 a tonne in October 2008 to $191.90 by February 2011.
The Australian dollar rose some 83 percent from its 2008 low to reach a record high of just above $1.10 by July 2011.
If the relationship between coal, iron ore and the Australian dollar in the 2008 crash and recovery had been replicated in the present commodity price weakness, the Australian currency should be somewhere around 75 U.S. cents.
Things are slightly better for Indonesia, the world's largest exporter of thermal coal, but its currency has also outperformed the decline in commodities.
Like the Australian dollar, the rupiah depreciated against the greenback as commodity prices slumped after the 2008 financial crisis and then rallied as global stimulus measures boosted commodity prices.
The rupiah peaked around 8,495 to the dollar in July 2011 and has since lost nearly 40 percent to trade around 11,876 in early trade on Monday.
This is a bigger depreciation than the Australian dollar's roughly 18 percent drop against the dollar since its 2011 peak, but it is still short of the 52 percent decline in thermal coal prices since the 2011 high.
ADVANTAGE SOUTH AFRICA?
The situation is better for another major coal exporter, South Africa, whose rand has dropped by around 68 percent from its post-2008 peak of 6.56 to the dollar in April 2011 to about 11.04 on Monday.
While this is positive for South African coal producers, the reasons for the rand's underperformance are probably a long-term negative, given investor concerns about political and economic stability in the country.
The question for Australia and Indonesia is whether the relationship between their currencies and the prices of the commodities they export is likely to be re-established any time soon.
The reason it has broken down may be due in large part to the unprecedented monetary policies being followed in the developed world, led by the U.S. Federal Reserve's zero interest rate policy and quantitative easing.
As the signs mount that the Fed is moving towards a more normal monetary policy, the expectation is that the U.S dollar will start to appreciate, especially against so-called commodity currencies.
Where the risk lies for countries like Australia and Indonesia is whether this currency adjustment will come quickly enough, or be big enough, to compensate for lower commodity prices.