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.

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Macro Afternoon

A mixed start to the week here in Asia as many stock markets and other trading venues are closed for holidays, with risk focused more on the Brexit brouhaha. The Shanghai Composite closed today for a holiday. The Hang Seng Index has gapped down significatnly, off nearly 2% to 27473 points, reversing most of last week’s build up

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Macro Morning (Trading Week)

By Chris Becker  The end of quarter re balancing on very bullish stock markets was overshadowed on Friday night by increased volatility on currencies, with the chance of an “unfriendly” Brexit sending Pound Sterling sharply lower. The other undollars also retraced from their recent rally as USD strength came to the fore with renewed vigor

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Macro Afternoon

As we head into the end of the week, the bulls remain fully in charge on global stock markets with Asian bourses looking set to end on a good note across the board. Not much data today, although some indication that the BOJ is unsure it will hit it’s inflation mark sent the Yen lower,

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Macro Afternoon

A mixed day here in Asia, with no strong positive follow through from overnight markets as a lack of economic data and any substantive change on the daily Yuan fix. The ASX200 was the only casualty, while Chinese stocks are putting in scratch sessions. The Kiwi is surging versus the Aussie dollar on the surprise

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Macro Afternoon

The Bank of Japan kept guidance and its policy intact today at the latest meeting, with no negative impact on Yen or stocks, as the rest of Asia continue the risk on mood from overnight markets. While the Yuan appreciated slightly offshore today against USD, the new round of tariffs has not filtered through to

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Macro Afternoon

Asian stock markets have reacted in a positive fashion to the Trump tariff announcement, fading the news, although locally the ASX200 dropped as the Aussie dollar lept higher on the RBA minutes and the easing of trade tensions (i.e a known known). The Shanghai Composite is in full reverse, currently up 1.4% going into the close

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Macro Afternoon

A mixed start to the week here in Asia with Chinese bourses continuing to tumble on the back of increased rhetoric surrounding the trade spat between the US and China. Taking the air out of this foul wind is the fact that Japanese markets are closed with currency markets relatively sanguine. The Shanghai Composite is down nearly

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Macro Afternoon

A strong finish to the week here in Asia with all markets lifting across the region as the Chinese trifecta of economic prints – fixed asset invenstment, industrial production and retail sales – came in pretty much as expected. The USD has fallen further against the majors, save Yen, with the Aussie dollar looking like

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Macro Afternoon

A big beat on unemployment today has spiked the Aussie dollar but sent local shares lower as Chinese markets move higher on the back of a slightly stronger Yuan. Currency markets are gearing up for the BOE/ECB one-two punch followed by a US CPI uppercut with volatility poured into the AUD as a result. The Shanghai

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Macro Afternoon

Not the expected sea of green here in Asia given the positive mood on Wall Street overnight with most bourses closing down for the day. The USD remains strong against the majors as the PBOC continues to dump the Yuan. The Shanghai Composite has again closed in the red, slipping 0.3% to close at 2636 points as it heads

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Macro Afternoon

A slightly better day here in Asia, but Chinese stocks remain in a funk as they stare down the short barrel of Trump’s hands on the tariff trigger. Moving into a week of central bank meetings and following Friday’s NFP print, risk markets – particularly currencies – are nervous, with all eyes on US stocks

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Macro Afternoon

A mixed start to the week here in Asia with most stock markets off but Japanese shares finish in the green due to a slightly weaker Yen. A slightly hotter than expected CPI print in China has taken the floor out of Chinese shares while the offshore Yuan was again sold off as the PBOC

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Macro Afternoon

Not a good start for risk markets as Monday provides plenty of gappy action, absorbing the news and politics of the weekend. Stocks were off across the region as the USD firmed against everything but Yen, as safe haven bids kept the Japanese currency high. The Shanghai Composite has started the week poorly, currently 0.5% lower

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Macro Afternoon

Not the most positive end to the week here in Asia with stocks slipping into the red on the US-China trade talks breakdown. As Europe wakes up more peripheral news hits the wires, particularly the Italian budget but also continued pressure on Turkey with the USD flexing its muscles once again versus the emerging market

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Macro Afternoon

Asian stocks have pulled back instead of bouncing higher in line with buoyant US markets overnight, unsettled by geopolitical tensions, particularly those brewing in Turkey. The Aussie and Kiwi dollar fell, the latter due to the lowest business confidence data in nearly a decade. The Shanghai Composite turns its slip into a selloff, closing 1% lower to

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Macro Afternoon

Asian stocks were relatively mixed with the near flat US lead overnight not providing the oomph necessary to push risk along. Westpac’s independent raising of its variable home rate saw the Aussie dollar fall in late trade, while the other majors are also slowly been reeled in by King Dollar going into the European open.