AUD/USD rally contradicts breakdown in 2Y AU-US yield spread
|- The 2-year yield spread no longer guides the exchange rate?
AUD/USD bottomed out at 0.7501 on Dec. 8 and rose to a high of 0.7979 yesterday. The 6.37 percent rally from the December low contradicts the drop in the 2-year Aussie-US yield spread.
Yield spread chart
- The 2-year spread fell into the negative in November and remained depressed near zero levels throughout December.
- As of writing, the Aussie 2-year bond yields only 6 basis points (bps) more than its US counterpart.
- The declining spread indicates the Aussie dollar is no longer a high yield currency.
Still, the AUD/USD pair has rallied more than 6 percent from the December low of 0.7501. Clearly, the correlation has broken down.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.