Australia Dollar Ebbs and Flows with Risk

If you chart the course of the Australian Dollar over the last twelve months alongside the S&P 500, the overlap is jarring. You can see from the chart below that the two lines zig and zag in almost perfect unison. It would seem that there was a slight break in the second quarter of 2010, but even this is an illusion, since the Aussie and the S&P continued to rise and fall in the same patterns over that time period, differing only in degree of fluctuation.

Since the S&P 500 is a pretty good proxy for risk it can be said that the Australian Dollar is a manifestation of investor risk appetite. When risk aversion was high, the S&P and the Aussie were low. When risk tolerance picked up, they rose. It’s funny how this came to be. I

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Mid-Day Report: Euro Lower as Weber Signals No Stimulus Exit Before 2011. Dollar Resumes Rally

Dollar rises sharply today on risk aversion and breaches recent high against Euro, Sterling, Aussie and Canadian. Weakness in global equities was carried through to European session, sending major indices mildly lower while US stocks are also set to open lower as selloff continues. Euro is additionally soft after ECB council member Weber said signaled that the stimulus measures will be in place throughout this year. Meanwhile, Canadian dollar drops sharp after release of tamer than expected CPI data.

ECB Weber said today that discussions about continuation of the exit of stimulus measures will be “focused on the first quarter” while ECB will need to “re-embark on a normalization procedure”. Weber suggested to keep full allotment in weekly, monthly and three-month refinancing operations until after the end of the year, which is “usually surrounded by some uncertainty regarding the liquidity situation.” The comments sent EUR/USD through last week’s 1.2733 low and Germany’s 30-year bond fell to a record low. <

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Bye-Bye Dollar!

This morning’s much anticipated Non Farm Payrolls report disappointed the market which sent the US dollar careening lower. While the unemployment rate held steady at 9.5%, this is probably more of a function of discouraged workers leaving the workforce. For the month of July, the US economy lost 131K jobs, nearly twice the expectation of a 65K loss.

In addition, the revisions to last month’s data came in nearly twice as bad as reported in what is becoming a familiar pattern. But the US isn’t the only country with bad employment figures today.

In Canada, the unemployment rate rose .1% to 8% as the Canadian economy lost 9.3K jobs, which is the first loss in 2010.

This report sent equity index futures and commodities lower, as well as the US dollar. Under a “normal” risk-aversion scenario, one might expect Dollar strength. However,

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