Australian Dollar Falls Broadly Amid Carry Trade Unwind

The Australian Dollar has been the worst performer among major currencies this week, falling against every G10 currency. Societe Generale says the losses are due to a carry trade unwind, where investors take profits on borrowings in low-yielding currencies.

Australia's economy is still creating jobs and its central bank, the Reserve Bank of Australia, is preparing to raise interest rates. However, these domestic fundamentals do not explain the currency's broad decline.

The explanation lies in global bond markets, which have seen a selloff driven by rising term premia, volatile oil prices, strong US macro data, and weak demand for US auctions. This has lifted currency volatility and triggered profit-taking in carry trades, where the Australian Dollar is a favored target.