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A$ Correlations Firmer With Yield Differentials, Less So Global Equities

AUD

AUD/USD correlations are sitting more elevated across yield differentials and some commodity prices, particularly relative to global equity sentiment. The table below presents the rolling 1 week and 1 month correlations for AUD/USD with key macro drivers (presented in levels terms).

  • Short term correlations are running positive for AUD/USD and AU-US government bond yield spreads. We sit slightly higher at the back end (10yr) but for the past month, the correlations are fairly similar.
  • Spreads have mostly moved against the A$, although the trend has been volatile. The 2yr spread is back to -119bps, we were at -84bps in early Jan. The post US payrolls low in the spread came around -140bps. The 10yr spread is back close to flat.
  • Versus commodities, the A$ correlation is high for aggregate commodities, but less so base metals and iron ore in the past week. For the past month though correlations remain strongly positive.
  • The correlation with global equities is also below normal averages for the past week and month.

Table 1: AUD/USD Correlations

1wk1mth
AU-US 2yr Spread0.380.70
AU-US 5yr Spread0.490.81
AU-US 10yr Spread0.650.71
Global Commodities0.720.57
Global Base Metals0.170.66
Iron ore-0.650.90
Global equities 0.18-0.05
US VIX index0.07-0.44

Source: MNI - Market News/Bloomberg

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