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

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

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Macro Morning

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.

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Macro Afternoon

A strong unemployment print locally buoyed Aussie stocks as the rest of Asia sold off on the back of a much lower Yuan while the BOJ tapers its bond buying program. The Japanese are also wary given the growing trade surplus with the US, with Wall Street confidence also to be tested later tonight as

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Macro Afternoon

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.

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Macro Morning

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

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Macro Afternoon

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

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Macro Afternoon

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

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Macro Afternoon

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

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Macro Afternoon

Trumps new round of tariffs has pulled the rug out from the confidence rally of recent days with the Chinese stock markets taking the biggest hits. The USD is rallying against the Yuan and the Aussie dollar in response and combined with the lead here in Asia is sure to put a dampener on the upbeat

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Macro Morning

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

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Macro Afternoon

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

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Macro Morning

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

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Macro Afternoon

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

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Macro Morning (Trading Week)

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

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Macro Afternoon

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

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Macro Afternoon

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

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Macro Afternoon

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

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Macro Afternoon

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

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Macro Afternoon

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

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Macro Afternoon

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