A$ Correlations Down From Last Week

A$ has stabilized somewhat in the afternoon session, with AUD/USD up close to 20 pips from the lows to be at 0.6890, while AUD/JPY is 30 ticks higher but remains sub 89.00. Correlations for the currency have come down over the past week in terms of risk appetite and commodity prices.

• The table below presents the correlations between AUD/USD & its traditional key drivers in level terms for the past 5 days and past month.
• Yield spreads with the US have moved against the AUD. The 2yr spread is now back below flat and also come in for the 5yr and 10yr tenors. Correlations though remain flat, and well down from levels at the start of the month when the RBA hiked its policy rate.
• Correlations for commodity prices have also come down, although remain elevated for iron ore. This may reflect oil's role in driving the headline commodity price index higher, giving less benefit to the AUD in the near term, particularly with global equity market sentiment remaining jittery.
• Correlations with global equities are lower, but still appear to be a stronger driver of AUD performance in the near term.

Table 1: AUSD/USD correlations

Source: MNI - Market News/Bloomberg