A mixed end to the week here in Asia with stock markets outside China rising even after a poor overnight lead from Wall Street. The USD continues to build strength although the Japanese CPI print for January came in slightly stronger than expected, moderating the fall in Yen and sending stocks higher. Here in Australia,
Australian Dollar Analysis, News and Forecasts
The Australian dollar, Aussie dollar (AUD) is one the world’s great commodity currencies. Founded in 1966 and floated in 1983 the Aussie “battler” is the 5th most traded currency in the world despite the economy being only the 12th largest by GDP.
The Australian dollar spent much of its first two decades post-float consistently devaluing from the pre-float value of $1.48 US dollars in 1974 to a low of 47 cent in 2001.
Subsequently it broke this huge downtrend with the rise of the Chinese economy and it’s insatiable demand for raw materials – especially those inputs into steel production, iron ore and coking coal – which Australian was endowed with in abundance. It topped this enormous turnaround in 2011 at $1.11 versus the US dollar.
As the super cycle entered decline so too did the Aussie, falling to a low of 68 cents in 2016 and still falling.
However, the Australian dollar had became popular as a small reserve currency holding with foreign central banks. As the value of the currency virtually halved during the bust they kept buying. Because global central banks were fighting both low inflation and oversupply worldwide, many engaged in an overt currency war, deliberately devaluing their currencies to capture or protect global market share of production. This was exacerbated by private sector flows pursuing the “chase for yield”.
This proved a challenge to Australian macroeconomic managers as the commodity bust persisted. Without the lower value, the Australian economy was unable to compete in non-resource sectors. The Reserve Bank of Australia embarked on a series of interest rate cuts, jawboning and, eventually macropudential policy, to bring the Australian dollar to fair value.
There are five drivers to the currency. Australia’s relative position vis-a-vis Chinese and its own growth; interest rate differentials, the strength or otherwise of the US dollar; the terms of trade and sentiment. Each of these tips into any fair value model but over time the primary driver is the terms of trade. The relative strength of each waxes and wanes with wider trends. For instance, during the “tech bubble” of the late nineties the Australian dollar was battered lower by poor sentiment as it was seen as a pre-tech dinosaur. After the “tech bust”, the currency rapidly recovered as sentiment turned favourable for real assets like commodities.
MacroBusiness covers all apposite data and wider analysis of these issues daily.
By Chris Becker Another very mixed night in stock markets on both sides of the Atlantic following an equally uncertain session here in Asia yesterday. The USD halted its advance against the majors, as did the rise in US Treasury yields, still reaching for that magical 3% mark. European markets absorbed the latest ECB minutes,
Following the poor lead from US stocks overnight, its been a rough day here in Asia, although the return of Chinese markets stopped a sea of red across the board. Its all about bond yields with Treasuries spiking and about to breach 3%, taking the USD with it, although Asian currencies like Yen and the
By Chris Becker Uncertainty is ruling risk markets once more as interest rate normalcy reared its ugly head again overnight with the release of the FOMC minutes, sending the USD and Treasury yields higher. Lingering concerns about the lack of inflation are impacting stocks with the three major US bourses all falling in response taking
A slightly better day here in Asia, but risk markets are still listless given the lack of follow through on Wall Street overnight from its long weekend holiday. A higher USD, possibly in the wake of higher bond yields as Treasury auctions mount up quicker than Trump’s record deficit spending, should help other domestic markets
By Chris Becker The return of US traders from their long weekend has seen the return of nerves with stocks selling off overnight as record Treasury auctions saw very high yields returned, sparking more fear that the bond bull market is over. The USD rallied against the majors taking weight of the respective domestic bourses
The poor showing in European stocks overnight has led to a mild selloff on Asian stock markets, not helped by the still closed Chinese bourses. The USD slipped against the Aussie dollar on the release of the latest RBA minutes but the Yen weakened, however it did not help Japanese stocks as expected. Caution is
By Chris Becker A long weekend in the US is not giving risk markets confidence as European stocks sold off slightly overnight as did German bunds and other sovereign bonds. Its going to be an interesting week for bond traders as US Treasury auctions will be quite large, with the 10 year yield still approaching 3%,
A flat start to the week in currencyland but stocks are poised to build on their recovery gains from last week, even in the absence of trading in China due to the NY celebrations and Wall Street tonight due to President’s Day. Japanese stocks performed the best despite a stronger Yen, while gold and oil
By Chris Becker The recovery continues, particularly on US stocks as 2018 brings forth more volatility and hence more opportunity. The USD is continuing its trajectory down, while Treasury yields go higher, but risk markets are getting back into the swing of things regardless. This bounce has not yet returned all the losses yet, and
A mixed end to the week here in Asia with Japanese stocks catching up to the rebound, Chinese bourses closed for NY celebrations and the ASX200 lagging as industrials and media stocks selloff going into the weekend. Oil prices continue to show some more exuberance, hitting a one week high while gold and other undollars
By Chris Becker As US Treasury yields march onward to the 3% level, risk markets are heading back to their jubilant highs with US stocks rallying strongly as European bourses put in much smaller gains. The USD is falling, helping gold – and Bitcoin which is near $10,000 again – and the majors, with Yen
Its all systems go in risk markets here in Asia today as the solid night on Wall Street translated into outsized gains for stocks. The falling USD helped, even though Yen made another high it didn’t drag down Japanese markets as expected. Chinese markets were closed for the New Year celebrations. S&P futures are up
By Chris Becker A slew of very positive economic data overnight with the US CPI overshooting, EZ wide GDP was strong, German growth was stronger, as was industrial production. Even though US Treasury yields shot up through 2.9% on the news, risk markets loved it and rallied across the board with the USD falling as
Another mixed day across Asia with only Chinese stocks rallying as the more correlated risk markets prepare for some serious economic releases. Yen hit another new high against USD while sovereign bond yields continued to fall following the US Treasury lead. In mainland China the Shanghai Composite continues to build on its positive start to the week,
By Chris Becker After a poor lead from Europe, US stocks looked like returning to their corrective phase overnight before a late surge saw minor advances as the USD continued to fall against the majors. Other safe havens continue to appreciate with Yen, Swiss Franc and gold higher while Treasury yields continued their minor retraction.
A slightly better day here in Asia on stock markets, although Japanese bourses are spoiling the party as the Yen continues to appreciate. A positive mood on Wall Street overnight translated into modest gains across most of the region, with the ASX200 finally playing catchup. Treasury yields continue to moderate while the USD also slips
By Chris Becker Everything is awesome as US stocks continued their Friday rebound rally last night, dragging European markets along for the ride. The USD fell against the majors, as did Treasury yields, taking some pressure off the beleaguered bond market while gold and copper both bounced back. In Asia today the economic calendar is
So we start the week here in Asia tentatively with some positive news coming out of Korea viz the Olympics and potential US talks with North Korea. Japanese markets were closed for a holiday and gold prices lifted slightly as the USD weakened across the majors. The ASX200 was the ugliest girl at the ball, mainly
By Chris Becker 2018 is getting interesting as we head into the second and possibly third week of a major correction of heavily correlated risk markets. This all started by the big leap in 10 year US Treasury yields, indicating that the world’s largest money market – bonds – was signalling the end of an
Another interesting day here in Asia with Chinese stocks smacked down even though the latest CPI print came in bang on target, the risk off night in Wall Street has spooked markets across the region today. Interestingly, the ASX200 was relatively unharmed, down less than 1% even as commodity prices slumped. It’s going to be
A less volatile session today here in Asia with most markets advancing, although the action was centered in China with the yuan falling on the back of poor trade data, taking mainland stocks with it. Aussie ten year yields jumped on the news, starting to approach 3% while the NZD fell on the back of
By Chris Becker A mixed reaction overnight to the subdued rebound in stocks in Asia yesterday with European bourses putting on strong gains, taking back their previous session losses. But in the US, a surge in bond yields again saw US markets fall around half a percent or so, mainly on the back of lower
Not the best rebound here in Asia with Chinese stocks selling off as other bourses reacted meekly to the overnight move higher in US markets. The ASX200 did the best however, but its looking tenuous going into tonights session.Yields are coming down a little though on Treasuries and the USD is gaining against the majors
By Chris Becker Crisis averted. Stocks bounced back in the US overnight after European bourses continued the selloff that wiped out Asia yesterday. The Volatility Index (VIX) went nuts (yes, that’s the technical term) ensuring a nail biting ride, but for currency traders it was a relatively calm night. Is this the bottom? Futures for
Its a short sellers paradise out there today in stock land, with a huge co-ordinated selloff – crash if you will – across all Asian markets. And it seems only stocks are really affected, with currency markets relatively sanguine, with the Aussie dollar absorbing the chaos and todays RBA meeting with aplomb. Where will it all
Its not quite a bath of blood on Asian stock markets today with mainland Chinese markets bouncing back, but they were the only brightness in a sea of red as the dreaded Monday morning gap was filled from Friday nights selloff. A most welcome correction, but one that has many spooked because of the rising