Australian dollar falls despite risk roaring back

See the latest Australian dollar analysis here:

Macro Afternoon

DXY was firm Friday night:

The AUD was universally weak against DM:

And EM:

Speculative positioning remains modestly bullish at 12k contracts:

Gold was soft:

Oil strong:

As the US rig count rose only three to 978:

• Total US oil rigs took an anticipated breather this week, +1 to 799
• Horizontal oil rigs were up, +1 to 697
• The oil price continues to recover
• If rig count additions continue on our forecast trajectory, expect this to weigh on sentiment during March, particularly if supply gains surprise to the upside

Base metals fell:

Big miners lifted:

EM stocks bounced despite DXY:

So did junk:

The key was a strong bid for Treasuries across the curve:

And Bunds:

Stocks took off to new post-correction highs:

There was not a lot to explain the bid in Treasuries that fired off the risk rally. China bailed out Anbang. European inflation was weak on target. Fed speakers were mixed.

What was of note was the AUD weakness in the face of roaring risk on. It appears the rapidly deepening yield spreads are starting to impact the currency. All spreads hit new wides before pulling back a little. The 5 year breached -30bps, it’s deepest in eighteen years before retracing:

But remember how dislocated the currency is from the carry at the moment:

Higher stocks and a lower AUD puts the MB Fund in clover.

David Llewellyn-Smith is chief strategist at the MB Fund which is currently overweight international equities that will benefit from a weaker AUD so he definitely talking his book. Fund performance is below:

January Performance

If these themes interest you then contact us below. 

The information on this blog contains general information and does not take into account your personal objectives, financial situation or needs. Past performance is not an indication of future performance. 

Houses and Holes


  1. Thanks mate, this is working for me in my super fund, I don’t have enough to join your fund at this early stage in my career.