AUD Tumbles as US Yields Break 5% Threshold
The Australian dollar slid more than 1% against the US dollar on Wednesday as US Treasury yields surged past 5%. The AUD/USD was trading around 0.7039-0.7041 after reaching an earlier peak at 0.7118.
US Treasury yields rose sharply, with the 10-year note breaching 5% for the first time since 2007. The US 5-year yield increased by 17 basis points to 4.99%, while the 10-year yield added 15.5 basis points to 5.11%. Meanwhile, the US Dollar Index (DXY) gained 0.57% to 101.25.
US economic data showed firm activity, with the S&P Global Manufacturing PMI rising to 57 from 53.9 and the Services PMI increasing to 58.7 from 56.5. Market expectations for a Fed rate hike in October increased to 66%, while December odds reached 93%.
Derivative traders are advised to position for further downward pressure on the AUD/USD, with purchasing short-term put options on the Aussie dollar seen as an attractive play. A weak employment change figure could push the currency pair below its immediate support at 0.7040.