Australian Dollar underperforms as rallying US Treasury Yields prompt risk-off mood

Australian Dollar Price Today

The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the US Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.18%	0.19%	0.08%	0.16%	0.46%	0.13%	0.12%
EUR	-0.18%		0.01%	-0.09%	-0.02%	0.31%	-0.06%	-0.05%
GBP	-0.19%	-0.01%		-0.11%	-0.03%	0.26%	-0.08%	-0.05%
JPY	-0.08%	0.09%	0.11%		0.06%	0.38%	0.00%	0.04%
CAD	-0.16%	0.02%	0.03%	-0.06%		0.31%	-0.07%	-0.02%
AUD	-0.46%	-0.31%	-0.26%	-0.38%	-0.31%		-0.37%	-0.33%
NZD	-0.13%	0.06%	0.08%	-0.01%	0.07%	0.37%		0.04%
CHF	-0.12%	0.05%	0.05%	-0.04%	0.02%	0.33%	-0.04%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).

At press time, 10-year US Treasury Yields are 0.18% higher to near 4.47%, extending the advance even after a 2% surge on Tuesday. S&P 500 futures trade 0.4% lower to near 7,470, reflecting a risk-off market mood. The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.15% higher to near 101.33.

Signs of improving US labor demand have boosted US bond yields. The US JOLTS Job Openings data for May showed on Tuesday that employers posted 7.594 million fresh jobs, higher than 7.3 million estimates and the previous reading of 7.585 million.

On the domestic front, easing hopes of another Reserve Bank of Australia (RBA) interest rate hike is also hurting the Australian Dollar. According to a Reuters report, there is now a 15% chance of a rise in the 4.35% cash rate at the next meeting from the RBA in August, and a 50% probability it is done hiking for this cycle.

Hawkish RBA prospects have cooled down as the return of oil prices close to pre-Middle East war levels has anchored global inflation expectations.

Earlier in the day, China's RatingDog Manufacturing Purchasing Managers' Index (PMI) arrived at 51.7 in June, as expected, marginally lower from 51.8 in May. Given that the Australian economy relies heavily on its exports to China, Beijing’s factory data impacts the Australian Dollar significantly.

Risk sentiment FAQs

What do the terms"risk-on" and "risk-off" mean when referring to sentiment in financial markets?

In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.

What are the key assets to track to understand risk sentiment dynamics?

Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.

Which currencies strengthen when sentiment is "risk-on"?

The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.

Which currencies strengthen when sentiment is "risk-off"?

The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.