###POV: AUD to Lose Yield Protection -The....>

AUSSIE: ###POV: AUD to Lose Yield Protection

-The AUD is set to lose its yield advantage over the USD on a sustained basis

for the first time since 1981. This is likely to prove a major event, not just

for the AUD but for G10 currency mkts.

-Meanwhile, the RBA has maintained a relatively dovish tone. Australian yields

have remained relatively stable. RBA's Ellis once again highlighted the downside

risk to interest rates (see MNI: 5 Observations We Made From RBA Ellis, MNI Main

wire, February 12, 2018).

-The last time US 10-year yields exceeded Aussie 10-yr yields was in 1981 a

period when AUDUSD fell by nearly 50% (AUDUSD decline 49% between 1981 and

1986).

-AUDUSD has rebounded from the 200-DMA, currently at 0.7760, but the recovery

could prove to be short lived. A failure to move back above the 0.7905 level,

which represents a 38.2% retracement of the decline from the 0.8136 Jan high,

will return the pressure to the downside. A move below 0.7760 would put the

focus on the November 2017 lows at 0.7500.