Shorthand for markets moving together on confidence. Risk-on: shares, commodities, crypto and the Australian dollar rise. Risk-off: they fall while bonds, the US dollar and gold firm.
In many periods a single factor, investors' appetite for risk, drives a wide range of assets at once. Good news on growth or easier policy produces a risk-on day; a shock produces a risk-off day.
The Australian dollar is one of the most risk-sensitive major currencies, so it often moves with global share markets.
Why it matters
When risk-on and risk-off dominate, diversification across risky assets helps less, because they move together. Recognising the regime explains why unrelated assets moved the same way.
