Graph 1  But first, it's helpful to understand why the Australian banks have typically paid a premium in this market. They obtain foreign currency by issuing debt offshore – including via bonds denominated in US dollars. They do this to help diversify their funding sources. It allows them access to deep, liquid foreign capital markets.
They then swap this foreign currency into Australian dollars in order to fund their Australian dollar assets, including the loans they make to households and businesses. The demand for Australian dollars in the swap market by the Australian banks is the flipside to the demand from other entities to swap Australian dollars into US dollars, much of which relates to their own hedging needs.