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

Stocks across the region were mixed today with the local bourse falling nearly 2% on the back of another rout in banks, while the trifecta of Chinese data also proved a little dicey even though on most metrics they were good figures. The oil price and their effect on energy stocks plus the Brexit deal

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Macro Afternoon

Stocks are sharply lower across most of the region in response to the risk off mood overnight with the added concern of a breakdown in Brexit negotiations and the falling oil price adding to the tensions. The PBOC again moved the Yuan closer to the 7 handle in a big move in today’s fix with

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Macro Morning

By Chris Becker A poor start to the trading week for overnight markets with US stocks selling off sharply on the back of tech giant Apple and confounded by falling oil prices that are hurting energy stocks. Brexit negotiations are also fouling up the roost in Europe while the USD is soaring against the major

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Macro Afternoon

It’s been a steady start to the week for equity markets here in Asia following the minor slump on Friday night in the US. Chinese stocks lead the way while Japanese bourses paused again despite a much lower Yen. The USD remains on a high against the major currency pairs while OPEC and other oil

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Macro Afternoon

A slew of bad internal data and new policy directions by Chinese authorities – not helped by another big easing in the Yuan fix by the PBOC today – has seen Chinese equity markets selloff to close the week out in a bad note. With no new direction from the Fed overnight, looking set to

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Macro Afternoon

The reaction to the US mid-term elections has been positive for risk markets in Asia, with stocks rising across the board while the USD floundered against the majors. The Kiwi has moved to a three month high while the Aussie is riding high on a wave of USD weakness. The Shanghai Composite is up slightly going into the

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Macro Afternoon

The US mid-term elections – or divorce proceedings in other words – have caused a bit of havoc on risk markets here in Asia, with currencies the most volatile. The USD has moved around substantially against both Aussie and Yen while the Kiwi rose significantly on a very good employment report, making tomorrows RBNZ meeting

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Macro Afternoon

It’s  been a mixed session here in Asia with Chinese stocks falling while Japanese markets lifted as Yen waned on a strengthening USD. The other majors are relatively unchanged though leading up to the US mid-term elections which are sure to ramp up volatility across risk markets. The RBA held at its meeting this afternoon

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Macro Afternoon

It’s been an interesting start to the week here in Asia with minor falls across the board on stock markets, with currencies also moving sharply around on the trifecta of Brexit news, BOJ Kuroda’s press conference and the reaction to Friday night’s non-farm payroll (NFP) report, aka US unemployment. The Shanghai Composite is down over 1%  going

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Macro Afternoon

A somewhat mixed end to the week here in Asia with most stock markets rising the wave of confidence that has set in on Wall Street earlier. Despite advancing local currencies due to a reversion in USD sentiment, plus falling oil prices, stocks look set to build from here – if tonight’s US unemployment print

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Macro Afternoon

Outside Japan it’s been a positive session on Asian stock markets today with domestic earnings troubles and a slightly stronger Yen the headwinds. The rest of the region is continuing the overnight bounce from Wall Street as traders struggle to build their confidence after an awful (if you’re long only) October. The Shanghai Composite was moving higher

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Macro Afternoon

The bounce is here in full with a sea of green across Asian stock markets today, navigating through a steady BOJ interest rate meeting and a somewhat disappointing Chinese manufacturing PMI print. Australian inflation figures – out of date given it’s quarterly – didn’t move the Aussie dollar that much either. The Shanghai Composite is moving higher,

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Macro Afternoon

Here comes President Trump to save the day – so goes the refrain, even though the blame for this correction lays squarely in his ample lap. The idea of a better “deal” with China is giving stocks a boost across the region, with the Yuan now into a ten year low against the USD as

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Macro Afternoon

Quite a mixed start to the week here in Asia with mainland Chinese stocks falling swiftly, while the rest of the region is putting on minor gains, the ASX200 the standout, as some confidence returns. The USD is retreating slightly against the majors, with the Aussie dollar spiking, following on from its Friday night reversal.

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Macro Afternoon

It’s not been the bounceback that we expected here in Asia with mixed results on stock markets across the region. The yuan dropped to a 10 year low, almost hitting the 7 handle versus the USD, while the Aussie dollar dropped to a two year low as the USD flexes its muscles. The Shanghai Composite is

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Macro Afternoon

It’s been a tough day for the long only crowd in Asian shares across the region, with falls of a similar magnitude to those of Wall Street overnight. Volatility in FX markets has been sanguine however, with the Aussie  bouncing slightly while the Kiwi deflates in the wake of the equity selloff, although this lack of