AUD Breaks Above $0.7200 as Risk Appetite Surges and Yen Strengthens

The Australian dollar (AUD) has broken above the $0.7200 level to hit multi-month highs against the US dollar, driven by a combination of factors including buoyant risk appetite and hawkish Reserve Bank of Australia (RBA) pricing.

According to data from TradingView, the AUD/USD correlation with S&P 500 futures stands at +0.88 over five days, while the relationship with Nasdaq futures sits at +0.95. This suggests that the Aussie is highly sensitive to shifts in risk appetite and US yields.

The recent strength of the Japanese yen (JPY) against the dollar has also contributed to the AUD/USD breakout, with USD/JPY continuing to unwind following a record intervention episode in late July and early August.

Looking ahead, market participants will be keeping a close eye on US inflation data, particularly the Consumer Price Index (CPI) due out on Friday. A strong reading could lead to higher interest rates and a stronger dollar, potentially reversing the AUD/USD breakout.