Caution reigns again in Asia after a poor lead from Wall Street overnight, with only mainland Chinese shares plus their Australian proxy in the green as the Yuan continues to be dumped. The big move lower by the PBOC has seen offshore trading in Yuan briefly touch the 6.80 level, while the USD is trailing against
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 Trump tried to rub out the recent gains in USD by criticizing the Fed’s interest rate rises, causing volatility across currency and stock markets. Commodities remain the greatest downside however, with copper plumbing new lows alongside gold while oil prices are relatively stable as the Saudis try to undermine concerns of oversupply.
By Chris Becker European bourses again led the confidence train on risk markets with tech stocks dragging down US stocks, even as Fed Chair Powell put forward an optimistic view of the US economy to Congress overnight. The USD remained elevated, but a late rally in commodities saw a mild bounce in currencies like the
Outside China, Asian stocks extended gains after last night’s rally on Wall Street pushed on by comments from the new Fed Chair. The USD continues to power ahead versus the major currency pairs with the Aussie dollar pushed to a two week low, gold at a nearly yearly low while the Yuan remains very weak.
By Chris Becker The USD and stocks lifted overnight on the back of Fed Chair Powell’s comments over the strong US economy, which helped to overshadow the ongoing trade tensions. Tech stocks were also helped by continued expectations of good earnings, with Microsoft about to report while the big banks continue to print higher. Recapping Asia’s
As Trump trounces Europe and supports Russian hegemony, markets continue to run the concern thread over trade tensions, while pushing the hope barrow on stellar US corporate earnings to keep the whole risk edifice afloat. The Aussie and Kiwi dollar advanced against the USD on RBA optimism and higher inflation levels in New Zealand. The Shanghai
Asia finishes the week on a relatively upbeat note despite the continued trade war and ructions in Europe over Trump’s barnstorm visit. Stocks put on gains everywhere but mainland China as the trade data print came in mixed. The USD remains elevated against everything, especially Pound Sterling which continues to feel the heat of a
Another strange day here in Asia as risk does a turnaround as the focus of Trump’s ire moved to Europe and away from China ever so briefly. This caught the shorts short (guilty as charged) and lead a rally across the region with Chinese stocks leading the way. The Shanghai Composite has recovered its previous loss to
By Chris Becker Its the day of the dollar as the USD crushes all in its path, including stocks, currency majors and commodities as Trump expands the trade war, pushing over Wall Street confidence amid an upbeat earnings season. It wasn’t just the tariffs, as the US PPI lifted much higher than expected, while emerging
By Chris Becker Overnight markets were relatively calm without much selling pressure from the ongoing trade war, with Trump’s new tariff list hitting the headlines after the close and likely to upset the risk-on rally since the NFP print on Friday. Recapping Asia’s session yesterday where the Shanghai Composite pulled back a little after lunch before
Kind of a nothing day here in Asia with the Chinese economic data nor the positive lead from Wall Street overnight failing to excite anyone save in Japan, which cashed in on a much weaker Yen. The USD is slowing growing in strength again with Pound Sterling in its sights tonight with probably further fallout
By Chris Becker Apart from the ructions surrounding Boris Johnston’s “Borexit”, risk markets are back in force with both sides of the Atlantic lifting overnight in response to the strong start to the week here in Asia. USD reasserted itself slightly, mainly against Yen, giving Japanese markets a big tailwind today while US Treasuries firmed once
Its risk on across Asia today in response to the very positive NFP on Friday night on Wall Street, setting the agenda for the month ahead. Chinese stocks lead the way, completely ignoring any negativity from the trade war with Trump as the USD fell against all the major currencies, sending the Aussie dollar up
By Chris Becker Yet another week full of opportunities for short term traders and full requirement for hedging and protection for long only holders of stocks. Led by big falls in Chinese stocks, most stock markets are in hesitation mode as the Trump trade war continues to send reverberations through risk markets. In currencies, the USD is
The imminent trade tariffs are not abating risk on Asian share markets with the return of risk on Wall Street last night filtering its way through here locally. The closely watched NFP combined with further Trump rhetoric on oil prices should make for a very interesting session on both sides of the Atlantic tonight. The Shanghai
By Chris Becker Risk is back as US traders return to their desks in a positive reaction to the release of the Fed minutes overnight. The USD rebounded slightly against the majors while oil prices came back a little with private inventory data suggesting an upside build. Its all coming along fast as we prepare
As the traders on Wall Street return from their holiday tonight, the session here in Asia has been less than sterling with only Australian stocks putting on any gains. The USD has moved lower particularly against Euro but also notably Yuan as the Chinese trade tariff deadline gets closer. The Shanghai Composite is in a selling mood
By Chris Becker With Wall Street taking the night off its been a directionless affair in Europe and elsewhere, but the trade war geopolitical tensions remain elevated enough to keep traders on their feet. The USD is losing some ground against the majors going into tomorrow nights NFP print, as gold comes back and oil
By Chris Becker Wall Street finished early for July 4th holidays and sold off quickly into the shorter session, dragging down the risk complex with it as nerves remain high around the trade war with China. European bourses did well however with a higher than expected PPI, lifting the Euro as the USD slumped against
A mixed day here in Asia in response to the suddenly positive mood on Wall Street overnight, with stock markets all over the place. Aussie stocks lept higher while Chinese stocks remain on the ropes as the Yuan remains under enormous pressure. The Aussie dollar eventually rose after a do-nothing RBA meeting, while commodity prices
Outside Australia is a sea of red again on stock markets with Chinese and Japanese bourses losing 2% or so to start the week on a very bad note. German political tensions over the EU immigration deal are falling over into markets with bigly potential for serious corrections across the risk complex as the global
By Chris Becker Another great week full of opportunities for short term traders and full requirement for hedging and protection for long only holders of stocks. Most major stock markets are in or nearing correction territory, led by Chinese stocks, as the Trump trade war continues to send reverberations through risk markets. The USD is
A much more positive end to the week/month/quarter/year here in Asia, with risk markets lifting basically on the migration policy getting nutted out in the EU. The Euro lifted on the deal, dragging up the Aussie dollar and other undollars with the Yuan coming back slightly from its big selloff against USD. Chinese stocks are
By Chris Becker Its nearing the end of the month/quarter/financial year and traders are getting a little complacent given the big moves in China recently, both stock and currency wise. Overnight both German CPI and US GDP prints undershot, although still very positive, with the Euro unmoved in the end while US stocks had a mile
Quite a mixed session in Asia today with Chinese markets selling off the hardest while the ASX200 lifted on a bank rally. There was more action in currency markets in preparation for some very sensitive releases tonight (German CPI and US GDP) with the Aussie still falling against everything, as did the Yuan on a
By Chris Becker Well there it is, risk markets are now in full correction mode with Wall Street falling overnight with the S&P500 breaking its key trendline and other key market assets like Aussie dollar signalling that the bears are now in charge. Nothing is really stopping this selloff as the USD surges higher on