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A$ Correlations With Yield Differentials & Iron Ore Dip

AUD

AUD/USD correlations are down a touch with cross asset drivers over the past week. The table below presents the levels correlations between AUD/USD and various macro variables for the past week and month.

  • Correlations with yield differentials remain negative for the past week, although still sit positive for the past month.
  • Spreads are generally moving against the AUD, given the relentless rise in US yields, which is arguing for weaker AUD/USD levels. However, dips sub 0.6700 are still supported for now.
  • It will be interesting to see if this lower correlation trend persists, particularly with the FOMC decision this week.
  • The other shift has been the move lower in correlations with iron ore, we still remain elevated for other commodities though.
  • It's a similar backdrop for global equities, while the A$ correlation with the VIX has dipped, but still remains reasonable for the past month.

Table 1: AUD/USD Correlations

1wk1mth
2yr yield differential-0.420.73
5yr yield differential-0.310.80
10yr yield differential-0.390.80
Global commodity prices0.740.85
Base metals0.660.66
Iron ore-0.070.54
Global equities 0.590.88
US VIX index0.04-0.63

Source: MNI - Market News/Bloomberg

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