The Dow was down 326 points overnight while the Nasdaq lost more than 100 points for the first time in 3 years. Gold rallied strongly as did the Yen.
But the Aussie dollar held its ground at 0.8750 against the US dollar, which in the context of the other moves is extremely unusual.
So what gives?
The key here is that the RBA has been knocking the Aussie dollar down for some time now and the low of 0.8660 during January was a solid 11c lower than the high of October last year.
Indeed the NAB FX Strategy team in their “Global FX Strategist” yesterday noted:
Contagion from the dishevelment across a broad spectrum of emerging markets and reflected in a sharp fall in risk appetite, explains much of the AUD weakness and which saw AUD/USD trade down to a new three year low of 0.8660.
The NAB also noted that even though the measure of “Fair Value” for the Aussie has fallen to 0.9150 over the course of january the Aussies continued fall meant it was still 4c below fair value.
Equally the speculative community is very short Aussie dollars and.
So there you have it: the Aussie dollar is proving unusually resilient because all the bad news seems to already be price in.