NAB: AUD/USD Move Looks A Bit Overdone Vs. Short-Term Valuation Model

NAB write “relative to our fair value model estimate (centred on $0.7270), AUD/USD’s fall of just over three cents in February looks a bit overdone. Our model estimate fell by around one cent in February with the rates and commodity components explaining the bulk of the decline in similar magnitudes. Of note, the risk factor was a small positive contributor, with a decline in EM FX volatility the major influence. Unlike our long-term model, our short-term model does not include developed market equity risk measures in the risk factor; this goes some way to explaining the spot vs. model estimate performance deviation during the month (risk aversion evident in DM equities decline in February certainly weighing on the AUD).”