Free fallin’ Australian dollar takes out new lows

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The Aussie dollar is free fallin’ this morning, taking out lows not seen (for more than a few seconds) in three years:

Remarkably, the key driver of value, the terms of trade, is higher now than at any time since the 2016 lows:

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But the other key driver of value, the yield spread, is at 40 year lows versus US yields, deterring capital inflow and prompting outflow:

It is the Aussie dollar tug-of-war on the century and while the trade war adds negative sentiment, the negative yield spread wins.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.