by Chris Becker The end of another week of trading here in Asia and its all about keeping the ship steady until the Americans wake up again. Aussie stocks fell with most Asian bourses putting in scratch or slightly positive sessions. The USD gained somewhat against Yen and Aussie dollar but the Euro continues to
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 A case of caution and treading water in overnight markets as US traders headed home for Thanksgiving with European stocks treading water as the Euro headed for a five week high. Oil headed higher amid other commodities as the USD maintained its weakness against the other major currencies. Recapping Asia yesterday first
by Chris Becker Hesistation across Asia today as US markets go quiet for Thanksgiving and retailers around the world ramp up for the Black Friday day/weekend/week. In mainland China the Shanghai Composite has reversed its recent breakout above 3400 points and then some, swiftly selling off into the close by slump more than 2% to
By Chris Becker The latest Fed minutes were released overnight and the official line of “waiting for inflation” is yet to be believed, so the USD sold off considerably against all the majors, given the Aussie dollar a reprieve. Going into the Thanksgiving holiday, stocks were relatively steady in the US and somewhat in Europe,
by Chris Becker Risk has doubled down in Asia with new highs almost across the board as the USD retreats and the yield curve flattens as all and sundry join the stock market trainride. In mainland China the Shanghai Composite continues its breakout above 3400 points, lifting 0.3% to be at 3419 points. The Hang Seng Index
By Chris Becker Markets absorbed the news of Janet Yellen’s resignation overnight, somewhat because its just procedural as Trump’s nominee Jerome Powell will take over at the end of her tenure – but in the main because its likely her replacement will effect the same type of monetary policy. A small rebound in US stocks was overshadowed by
by Chris Becker Not a good start to the week for risk as Asian stocks fall in reaction to weekend news of troubles in forming a new government in Germany, combined with fallout from Chinese authorities warning about their own overheated markets. Valuations are very stretched and the usual platitudes are not suffiecent enough drivers
By Chris Becker It’s coming up to Black Friday (or Weekend, or Week, depending on how desperate the retail outlet is) which could be an apt description for the current trajectory of stock markets around the globe. Unhinged by largesse and soaring to record highs, stocks wobbled significantly last week as the USD retreated, and
by Chris Becker A recovery of sorts in Asia today with most stock markets lifting as selling sentiment exhausted itself. Chinese banks received some big injections from the PBOC today with commodity prices relatively stable. The Aussie dollar found a floor finally on the surprisingly good unemployment print. In mainland China the Shanghai Composite is
by Chris Becker While it was a “yes” here in Australia, Asia is saying no to risk with stock markets continuing to selloff amid a broadening correction. The solid GDP print in Europe overnight was followed by a positive, but no upside surprise in Japan today, but sentiment sent stocks down as the Yen appreciated. In
By Chris Becker Last night saw a raft of European-centric economic releases, with 3Q German GDP powering ahead while UK inflation remained high, sending Pound Sterling higher. EZ wide GDP, helped by the central power remains well above 2% which sent Euro significantly higher against USD, and European stocks selling off slightly. In the US
by Chris Becker Another poor session here in Asia with most stock markets off again as risk seems to be off the able in prepositioning for a slew of key economic prints and central bank talkfests in the coming sessions. In mainland China the Shanghai Composite was down over half a percent before lunch, before
By Chris Becker Not exactly a confidence inspiring end to the week on global stock markets, as the weaker USD combined with disparate geopolitical dramas overshadowed continued solid economic and corporate earnings reports. From the UK with nearly collapsing Brexit talks to the US with their very troubled fiscal agenda, to the wars brewing in
by Chris Becker The fallout from the drop in US stocks continued in Asia today, taking the edge of what was a good week for traders. While earnings seasons around the globe indicate strong corporate growth, the legislative chaos that is the US Congress is forestalling any further risk in markets. Next week’s APEC meeting and
by Chris Becker Today’s Chinese inflation data figures did nothing to dampen risk appetite here in Asia with most bourses rallying to new highs. Currency markets have been active with the Kiwi up on news the RBNZ may hike rates earlier than planned, while the Yen strengthened late in the session also. In mainland China the
By Chris Becker US stocks battled out for confidence in, well con-men over the GOP’s tax cuts and tech stocks as gubernatorial elections in the US handed Trump and the Republicans a drubbing. The USD was effectively unchanged, but some of the majors are starting to find a bit more strength as Treasuries also fell.
by Chris Becker The lack of progress and outright indignation with the release of the Paradise Papers over Trump’s tax reform meant risk hit a snag today in Asia, not helped by the “diplomatic” words of war regarding North Korea. Most Asian share markets retreated or barely scratched away as commodity prices also came off
By Chris Becker US stocks closed relatively unchanged as European bourses were mixed following a stellar lead from Asia yesterday. Traders are right not to be certain of the technological terror they have created as overexuberant share markets are exhibiting classic topping patterns. The news of change in Saudi Arabia has settled for now, calming
By Chris Becker The wobbly Asian session translated into mixed nights across Europe and the US, with the latter popping to new highs again, but only just as the lack of economic catalysts weighs early in the week. Higher oil prices brought on by the rising turmoil in Saudi Arabia helped lift energy stocks, which
by Chris Becker Asia starts the week in a mixed fashion, given the strong lead from Wall Street on Friday night, with most stocks dropping or putting in scratch sessions. The Yen fell as Trump waffled in Japan about manufacturing as their continues to be no sign of inflation, as the BOJ continues to hold off
by Chris Becker Asia ends the week in a positive mood – outside China at least – as traders gear up for the most important economic event on the calendar, Octobers US unemployment print (NFP). In mainland China the Shanghai Composite has slumped again, falling 0.8% to be at 3356 points, now well below previous resistance at 3400