MS on the Australian dollar, this their 'bottom line' summary from a longer piece:
- There has been a marked divergence between the movement of commodity prices and the performance of AUDUSD in recent weeks. We ran a rolling regression to explore which variables are the most relevant in explaining the current movement in AUDUSD. High level conclusions suggest the AUDUSD cross is mostly driven by China-related factors, while rate differentials are playing an increasingly important role, especially after the differential turned positive for the US post Jan 2018. This analysis suggests investors should aim to short the AUD via FX crosses that are less correlated with China risks if they wish to position for further weakness in the Australian economy while being hedged from stronger Chinese growth.
(bolding mine)
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ps, The regressors used by MS in the analysis were:
- The RBA's Commodity Price Index
- 5yr rate differentials
- Hong Kong's Hang Send stock index
- DXY
