AUD/USD Drops Back to 0.9890 as Yield Premium Over U.S. Shrinks

Australia’s dollar was near an 11-month low as the premium the nation’s bonds offer over U.S. debt shrank to the least in a year, sapping the allure of the currency as a higher-yielding asset.

The extra rate investors get by holding the South Pacific nation’s 10-year notes instead of similar-maturity Treasuries shrank to 1.27 percentage points yesterday, the lowest since June 2012. Yields on U.S. securities climbed to a two-month high this week amid speculation the Federal Reserve may consider tapering bond purchases as the economy improves.

“The Aussie dollar will be quite heavy,” said Joseph Capurso, a Sydney-based foreign-exchange strategist at Commonwealth Bank of Australia. “The U.S. dollar will remain quite firm, I think U.S bond yields will continue to lift a bit further.”


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