Aussie Dollar Risk Hits a 13 Year Low as Central Banks and Money Managers Bid on Weakness

“Expectations for price swings in the Australian dollar are near the lowest in almost 13 years relative to major currencies, as central bank purchases of the so-called Aussie damp its sensitivity to political turmoil.

Implied three-month volatility on the Australian dollar, a measure used to price options, fell to 7.20 percent as of 4:21 p.m. in Sydney, the lowest level this week, data compiled by Bloomberg show. The JPMorgan Group of Seven Volatility Index climbed to 9.52 percent, a three-week high. Aussie volatility was 2.43 percentage points less than the JPMorgan gauge on March 19, the widest discount since March 31, 2000.

Central banks buying Australian dollar debt have helped drive the currency’s record eight-month stretch above parity with the U.S. dollar. The Aussie has climbed 0.2 percent this week to $1.0427 and reached $1.0459 yesterday, the strongest since January. Prime Minister Julia Gillard held on as leader of Australia’s minority government, winning the second challenge in a year, while an impasse on Cyprus curbed global risk appetite.

“The Aussie has been attracting really good demand on dips from real money accounts and reserve managers, attracted by the highest yields among a shrinking pool of AAA assets worldwide,” said Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong. “There’s not enough of a policy difference between the two sides to see the Australian dollar react to the political shenanigans.” …”

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