AUD/USD risk reversals clock 8-week high, 2Y yield spread at lowest since 2001

• AUD/USD risk reversals shed bearish bias.
• Falling 2-year yield spread still favors the downside in the AUD.

Risk reverals

• AUD/USD one-month 25 delta risk reversals witnessed an upside break of the recent trading range and clocked an 8-week high of -0.60; the highest level since Sept. 14.

2-year AU-US yield spread

• The spread (difference) between the Australia 2-yr bond yield and the US 2-yr treasury yield continues to lose altitude.
• Currently, the spread stands at 15.8 basis points; the lowest level since early 2001.
• The falling yield spread validates the monetary policy divergence. The Fed is expected to raise rates in December, while the RBA is seen keeping the rates unchanged intact throughout 2018.