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13 Jun 2014
AUD: Forget about fundamentals, it's all about sentiment - TDS
FXStreet (Bali) - Annette Beacher and Prash Newnaha, FX Strategists at TD Securities, share their take on what they believe to be the main driver in the Australian Dollar, namely sentiment for high-yielding assets such as AUD, NZD.
Key Quotes
"AUD strength despite a dovish RBA and collapse in key commodity prices continues to have many in the market scratching their collective heads. Why is it that the AUD continues to defy expectations for it to head lower? Quite simply, a lot has to do with sentiment."
"The AUD was a consensus short at the beginning of this year. Indeed with the RBA outright calling for a lower AUD in the final months of 2013, the short was meant to be a slam dunk. Well, we know how poorly consensus trades have performed this year!"
"Year to date, the AUD has shown a very low correlation to the traditional market observable variables it has been linked to."
"While it is difficult to find a common thread amongst these variables, the factor that most closely links them is the appetite for carry."
"The AUD speculative net long has turned sharply higher, reflecting investor appetite for yield as sentiment shifted to global central banks keeping rates lower for longer. The drop in highly rated sovereign yields has lifted the demand for the higher yielding AUD, and also explains the NZD has outperformed."
Key Quotes
"AUD strength despite a dovish RBA and collapse in key commodity prices continues to have many in the market scratching their collective heads. Why is it that the AUD continues to defy expectations for it to head lower? Quite simply, a lot has to do with sentiment."
"The AUD was a consensus short at the beginning of this year. Indeed with the RBA outright calling for a lower AUD in the final months of 2013, the short was meant to be a slam dunk. Well, we know how poorly consensus trades have performed this year!"
"Year to date, the AUD has shown a very low correlation to the traditional market observable variables it has been linked to."
"While it is difficult to find a common thread amongst these variables, the factor that most closely links them is the appetite for carry."
"The AUD speculative net long has turned sharply higher, reflecting investor appetite for yield as sentiment shifted to global central banks keeping rates lower for longer. The drop in highly rated sovereign yields has lifted the demand for the higher yielding AUD, and also explains the NZD has outperformed."