Australian Dollar Cannot Sustain its Drive without Risk Trends

As long as sentiment and the S&P 500 are climbing, there is little question as to the expected performance of the Australian dollar. The 4.25 percent benchmark lending rate, 4.41 percent money market rate and 3.81 percent 10-year government bond yield offer the Aussie a clear yield advantage over most of its counterparts. And, even when underlying risk appetite is idling in neutral, yield this high is enough to tip the risk-reward balance and push buying interest forward. However, at the first sign of the market unwinding its risk exposure; the Australian dollar will be harshly judged. A high yield will can keep traction in a steady or advancing market, but these differentials can’t hold back a true selloff.