AUD: Currency Index & Volatility

Relative Currency Strength

The Aussie took the first hit right off the bat on July 30, when USD strengthened due to good GDP release. AUD continued its downward movement caused by the strong U.S. economic growth figures, having a small rally on Thursday’s evening when a positive AiG Manufacturing Index was released. Friday was the turning point of AUD caused by the increase in US unemployment and decrease in US Nonfarm Payrolls, and the AUD index reduced up to its minimal value of 99.3. In the last two days, without any unexpected news causing large surges, the Aussie managed to avert some of it loses and held in the range of 99.5 to 99.8, ending the week at the 99.6 mark with 0.37% loss from baseline.

The Greenback was undisputedly the best performer during past 5 days as its currency index rose to the top against a background of good news. Despite the Friday’s fall caused by the rise in unemployment, USD still managed to recover by Tuesday, ending the period with a healthy 0.57 % advance. Meanwhile, CAD had a disappointing period ending it with a 0.53 % drop from its baseline. SEK had the most conspicuous index these past few days as a series of negative GDP and positive PMI made it fluctuate quite a bit. The Kiwi is the sad story of the period as it struggled to reach the 100.6 mark just to take a massive hit from a fall in dairy prices ending the period at the 99.7 mark.

Volatility

The greatest rises of AUD/USD volatility were observed on Wednesday and Friday against the background of influential news on U.S. economy – unexpectedly high GDP value and increasing Unemployment Rate, respectively. Nevertheless, some minor spikes of volatility were associated with news on Aussie. The activity in Blue Area fully corresponds to AiG Manufacturing Index and PPI announcements. In the same day the release of negative commodity price change was followed by AUD depreciation and rise of pair’s volatility. Tuesday’s morning was marked by one more noticeable announcement from Australia. The RBA Rate Statement, which recognized the overall financial conditions and monetary policy as accommodative, caused pair’s volatility increase.

The elevated volatility proportions and the values of Volatility Indexes of both the market and AUD/USD currency pair were on their average levels during the period. It is worth noting that generally tranquil EUR/CHF was unusually dynamic and became the most volatile pair in terms of elevated volatility proportion past week. The highest peak of the volatility was reached by USD/SEK after the release of surprisingly low Sweden GDP, when the pair’s Volatility Index surged to 5.09 mark. Thus, Sweden GDP release can be recognized as the most resonant event of the period.

Currency Significance

The period started with the rather dynamic movement of the AUD measure, but it was mostly caused by news from U.S. Meanwhile, on Wednesday the composite reduced up to its lowest value of 0.43. The first hike, similarly as in the other observed parameters, followed the AiG MFG Index release on Thursday evening. Thus the lowering of the RBA Commodity Price index has strengthened the positive dynamic of the measure, and it reached the week’s highest value. The next increasing of the measure occurred on Monday, right after AiG Services Index came out. The main news came from Australia on Tuesday morning, and in the time of the Interest Rate Decision release, the composite gained 0.77 – the second best value of the week.

The components of the Australian dollar significance measure were strongly correlated over the observed period. The short-term correlations between AUD/USD and other AUD crosses varied from 0.47 to 0.79. The only exception was correlation with AUD/NZD, a few falls below the null level provided the component the weakest result of the week. Compared to the long-term values, most of the correlation pairs have lost 0.06-0.16 points, and distributions of the correlations have shifted down. The composite also showed a solid bond, holding in a range of 0.43 to 0.79. Nevertheless, the measure had a lot of ups-and-downs and ended the week on the relatively low level of 0.44.