Analysis-The Aussie is losing its way as markets' risk compass

By Tom Westbrook and Stella Qiu

SINGAPORE/SYDNEY (Reuters) - The Australian dollar's astonishing resilience successful the look of the deed to marketplace sentiment from U.S. tariffs is raising questions whether its long-standing relation arsenic a proxy for hazard is ending.

The Antipodean currency conscionable notched its steadiest 4th for 2 years, rising astir 2% this twelvemonth to astir 63 cents, adjacent arsenic U.S. shares person dropped much than 4%.

The breakdown successful that correlation is slowing commercialized successful the Aussie, hurting Australian investors successful the U.S., and highlighting however U.S. President Donald Trump is rocking the pillars of fiscal markets.

It is simply a effect of an antithetic crook successful the U.S. dollar, which, says Bank of America currency strategist Oliver Levingston, has changeable little unneurotic with stocks for lone the 3rd clip successful 25 years.

"It's conscionable not playing its game," said Nick Twidale, main expert astatine online broker ATFX, referring to the Aussie, adding that his steadfast is seeing a driblet successful trading volumes of the currency. "It feels similar the Aussie has mislaid its correlation."

The Aussie earned its estimation arsenic markets' "risk" proxy from Australia's export profile, since Australia sells the earthy ingredients of economical growth: robust ore, ember and gas.

Over the 4 decades the currency has been freely convertible, the anticipation that those bellwether exports warrant it tracking the planetary temper has been self-reinforcing and earned it an outsized relation successful overseas speech trade.

Australia is the 13th-largest system successful the satellite and its currency is the world's sixth-most traded.

Now, according to analysts astatine Westpac, its narration with U.S. stocks is weaker than astatine immoderate clip since the pandemic arsenic Trump's commercialized warfare accelerates what had been a dilatory but decade-long diminution successful the Aussie's narration with planetary risk.

"Our conjecture is that Trump's presidency has fundamentally rewired the narration betwixt currencies and equity hazard metrics," Westpac's caput of overseas exchange, Richard Franulovich, said successful a enactment published connected Monday.

The different large changes analysts constituent to successful the past decennary are the dependable maturation of Australia's offshore concern portfolio, and a displacement successful reliance connected commodities, with the effect that Australia's nett planetary assets person surged.

"The state is virtually little leveraged to planetary maturation compared to what it utilized to be, conscionable from the equilibrium of payments perspective," said Lachlan Dynan, overseas speech strategist astatine Deutsche Bank successful Sydney.