Australian Dollar

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.

10

Macro Afternoon

The overnight pullback on risk markets in the wake of the Trump “diplomacy” over North Korea has translated into similar moves here in Asia, although Japanese stocks fared better than expected as Yen weakened against USD throughout the session. The weaker USD is keeping commodities steady, including gold and the Aussie dollar. The Shanghai Composite is still

38

Macro Afternoon

Trade deals are front and centre of worries on Asian markets today on the back of the Fed’s release of its latest minutes, which seem to be pushing out the June rate rise. Treasuries remain poised at the 3% yield level while the USD remains strong, stocks are mixed going into the European session. The Shanghai

31

Macro Afternoon

Its looking more and more like risk-off as Asian markets retreat in line with US markets overnight, the possible breakdown of talks on the Korean peninsula and the US growing trade war with China the likely catalysts. The Shanghai Composite slumped after a minor pulback below strong overhead resistance at 3200 yesterday, falling over 1.4% to

32

Macro Afternoon

Asian stocks have not translated the firm gains on Wall Street overnight, with falls across the region as currency markets shake out a recently weaker USD. A stronger Yen and Aussie have pushed down their respective bourses, while gold remains depressed. The Shanghai Composite gave up its previous gains to fall about 0.7%to 3192 points

48

Macro Afternoon

A generally positive day across Asia to start the trading week. The USD advanced against the major currencies and gold, helping inversely correlated Japanese stocks while local shares floundered. The Shanghai Composite is up nearly 1% or about 25 points at 3215, finally out of the shadow of very strong overhead resistance at 3200 even, giving the impetus for a

27

Macro Afternoon

Another mixed session here in Asia as the week draws to a close with Japanese stocks advancing while Chinese and satellite bourses like the ASX200 scratch along for the ride. Its all about interest rates, the USD and emerging markets at the moment as the ten year high in Treasury yields begins to bite on

50

Macro Afternoon

Asia markets have not been able to translate the firm gains on US markets overnight to the region, as the weaker Yen was able to only lift Japanese bourses. The monthly jobs figure in Australia saw the Aussie dollar lift higher strangely enough as the ASX200 was pushed down again. Tonight the focus will be

1

Macro Morning

By Chris Becker A much better night on risk markets in response to some secondary reports in the US regarding industrial production with housing starts overperforming and oil inventories shooting to the underside, lifting oil prices and hence energy stocks. European markets were mixed as the Euro dropped on the new Italian government while gold

45

Macro Afternoon

Yet another mixed day here in Asia as tensions rise once again on the Korean peninsula and the impact of higher US interest rates from the spike in Treasury yields is felt across risk markets. Only the ASX200 put in a positive session with gold putting in a small rebound from its sharp selloff overnight.

51

Macro Afternoon

Quite a mixed day here in Asia given the lack of volatility in overnight markets with the only bright light being mainland Chinese shares on the back of solid April data. Other stock markets had small declines as the major currencies tread water against USD. The Shanghai Composite had a late afternoon attempt at breaching the next resistance

26

Macro Afternoon

Risk markets lifted all across Asia, starting the week on a strong point. This has yet to translate to higher futures on European or US stocks, but the mood should be optimistic going into the City open. The USD remains slightly weaker from its reversal late last week, as all eyes are on further trade

33

Macro Afternoon

Outside mainland China its been a solid day again here in Asia, with stock markets finishing their best week since February. Currencies were largely unchanged with gold prices also slipping, but futures are looking good going into the European session. The Shanghai Composite was unable to breach the next resistance level at 3200 points, losing about 0.3%

33

Macro Afternoon

Another solid day for risk markets here in Asia, taking the US lead overnight. The Chinese CPI print disappointed on the downside, with the USD losing some ground against the Aussie but not Yen or other majors leading into tonights BOE meeting. Geopolitical risks are coming to the fore again with Malaysian elections and tensions

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Macro Afternoon

A mixed day here in Asia with stocks exchanging wins for losses across the region in the wake of Trump’s dumping of the Iranian nuclear deal. Oil prices are starting to spike going into the European open alongside a rally in the USD and Treasuries. The Shanghai Composite had a scratch session today, closing a few points

36

Macro Afternoon

The impact of the higher USD continues to weigh on developed markets, but the big stock bourses in Asia continued their rebound as futures for European and US stocks advanced. Oil prices are the markets to watch, with WTI hovering around the $70USD per barrel level and Brent above $75 as traders await the Trump

44

Macro Afternoon

The fallout from the US unemployment print on Friday has been quite positive, with all stock markets closing higher here in Asia. The USD remained steady against the majors, as most of the action was priced in the late Friday session. Commodities were relatively stable as well while the bond market lifted with the Aussie