DXY has blasted off and is performing its usual role as a global safe haven as EUR is bombed into rubble:
But that is no impediment to the AUD which is now the hottest currency on earth:
Against oil exporters:
And traditional safe havens:
In part, this can be explained by how short the market is. It’s been caught wrong-footed by the Ukraine war:
The other part is the insane commodity blowoff:
Finally and bizarrely, this commodity boom is going to largely bypass Australia’s real economy. The usual channels of distribution for spreading terms of trade boosts are all broken:
- Morrison’s deficits are so enormous that improvements will make little difference. There’ll be no tax cuts. (Or will there be, mwhahaha!)
- Stocks are falling anyway.
- Wage gains are narrow and limited with little follow-on investment from miners because, believe it or not, Australia’s biggest commodities remain in structural oversupply. Iron ore fines, Gas and the two Coals.
However, this is all too subtle for interest rate markets that are now pricing RBA rate hikes that will level the economy.
So, the AUD is surfing the madness of crowds chasing commodities as inflation hedges, sent into panic by Russia and squeezing the shorts all at once.
I wouldn’t exactly call that the definition of a safe haven but it’s got legs unless or until the war ends or global economic growth does.