AUD/USD Breaks Above 0.7200 on Yen Strength

The AUD/USD has broken above the 0.7200 level and is trading at its highest since early May, as the yen's continued rally helps soften the US dollar and amplify the Aussie's upside response.

The relationship between the Australian dollar and risk appetite is consistent across short, medium, and longer-term timeframes, with correlations with S&P 500 futures standing at +0.88 over five days, +0.54 over 20 days, and +0.60 over 60 days.

However, there has been a rapid increase in the inverse correlation between the AUD/USD and US yields across the front end and belly of the curve, with the five-day correlation with US 2-year yields strengthening to -0.94 and the relationship with US 10-year yields standing at -0.97.

The Aussie's reaction to shifts in those markets has been asymmetric, with larger upside responses when yields have eased and risk appetite has picked up.