Forex Flash: RBA creates vulnerability for AUD crosses – Westpac

FXstreet.com (Barcelona) - Gold is testing 11-month lows. Copper has fallen about -12% since Jan to 8 month lows. Coal prices remain depressed. Forecasters are increasingly confident that iron ore prices are heading substantially lower in the months ahead, albeit at least in part due to the large increase in supply. Yet the AUD/USD is lingering near 1.0500 once again. Investors could be forgiven for wondering if commodity prices matter at all to AUD at the moment. A check of the correlations of daily log returns between AUD/USD and the Westpac Commodity Futures Index (finds the correlation remains positive but not high, 0.25 on the 30 day rolling window.

However, according to Global FX Strategist Sean Callow at Westpac, “The AUD/USD has been able to shrug off weakness in Australia’s key commodities, with some help from softer US data. The on hold RBA also argues for broad ranges on AUD but some vulnerability on crosses.