The logic in the market is that any contraction in quantitative easing by the Federal Reserve will cause a flood of funds back to the US from international asset markets. If this starts to happen, it will obviously be bullish for USD/AXY (Asian currencies excepting the Yen). The FX market is treating the AUD/USD as a proxy for this trading idea, hence the big sell-off. Keep an eye on events in regional equity and debt markets for indicators of what’s likely to happen next.
