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 Morning

By Chris Becker  US/China trade tensions are subsiding this time, with US stocks lifting overnight alongside bond yields while the USD remained firm, not withstanding a spike due to the latest OECD Economic Outlook. Commodity prices remain relatively calm during this whole mess although gold is sitting on a monthly low. Yesterday saw Asian stock markets bounce

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Macro Afternoon

Asian stock markets are generally positive or putting in mild scratch sessions with Japanese stocks ending the day slightly lower after the US seemingly eases up on sanctions against Huawei. Risk sentiment is swinging back to positive while USD remains very firm as the Australian dollar rolls over below its pre-Monday morning gap. The Shanghai

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Macro Morning

By Chris Becker  US/China trade tensions are spiking again, this time on the hullabaloo around Huawei with tech stocks sinking overnight, dragging down industrials and taking away most of any remaining risk confidence. Interest rate and currency markets were more benign but the USD remains firm across all undollars, with the Australian dollar rolling over post

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Macro Afternoon

A mixed session to start the week here in Asia, although dead cat’s are bouncing and rolling over here and there, the local market is soaring due to the pro-bank and pro-mining party getting voted in over the weekend. The Australian dollar is also on a tear post the election, although still remains below 70

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Macro Afternoon

Dead cat’s are bouncing everywhere as tensions between China and US ramp up again, with The Middle Kingdom complaining about the “little tricks”, sending Chinese stocks down and futures cratering for tonight’s open and close to the week. The upcoming federal election in Australia hasn’t dampened the risk appetite locally, helped along by a much

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Macro Afternoon

The bounceback is getting a bit wobbly here in Asia with confidence not returning in full as expected. Japanese stocks are down while Chinese bourses are treading water, as local stocks are bid as the Australian dollar falls in the wake of a “surprise” lift in unemployment. The Shanghai Composite is floating along here, currently

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Macro Morning

By Chris Becker  Sentiment was mixed overnight with stocks rising, but some disappointing US economic data pushed bond yields and risk currencies lower, Pound Sterling in particular pushed down to a new monthly low. The latest DOE oil inventory report saw a jump in crude prices while Bitcoin remained over $8000USD. Yesterday the Shanghai Composite has bounced

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Macro Afternoon

The bounce continues here in Asia with stocks up across the board while currency markets are steady as the USD firms. The trifecta of Chinese internal economic releases came in lower than expected but this was overshadowed by the PBOC cutting the Yuan fix again to its lowest point since January, as the trade war

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Macro Afternoon

Not the bath of blood that the media (and me!) expected with the continued fallout from the US/China trade war hitting risk markets across Asia, but with some reservation from the bears. The PBOC moved the Yuan sharply lower against USD, the weakest all year while Yen stopped firming against USD. The Shanghai Composite is

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Macro Afternoon

With no progress to report on the US/China trade talks and Trump thankfully still asleep (or his staffer’s have taken away his iPhone) there haven’t been any catalysts to upset markets on the open here in Asia today. The Yuan is depreciating sharply due to the PBOC trying to head off the tariffs while Yen

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Macro Afternoon

The tide may be changing with Chinese stocks rebounding to finish the week on a sweeter rather than sour note as optimism around the trade talks with the US climbs. The Australian dollar is inching its way back to the 70 cent level while Yen and other safe havens remain stable. The Shanghai Composite has

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Macro Afternoon

The risk off sentiment is growing with Asian share markets falling across the board, except locally, as the USDJPY pair hits a three month low. Its all about how Trump can keep his mouth shut during the upcoming US/China talks, although news of another missile launch in North Korea is adding to the volatility. The

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Macro Morning

By Chris Becker  Risk markets are stabilising, somewhat, as the US/China trade war concerns ease slightly as Chinese trade officials arrive in the ‘States. Treasury yields are up slightly while the USD has retreated against most undollars, although Pound Sterling is falling sharply and the Australian dollar remains under 70 cents. Looking at Asian markets

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Macro Afternoon

A sea of red across risk markets here in Asia as they continue to react to the Trump/China trade battle. There was some stability in currency markets, except in Kiwi as the RBNZ cut rates, while gold prices lifted slightly. The Shanghai Composite has fallen below 2900 points, down over 1% to 2893 points to

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Macro Afternoon

Finally a full session here in Asia as Japanese trader’s came back from the Golden Week as risk markets continued to react to the Trump/China trade battle. Meanwhile, the RBA meeting came and went with almost no change as the stubborn boffins at Martin Place continued to put their heads in the ground, sending the

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Macro Afternoon

Trump is causing a ruckus on risk markets across Asia today with just two tweets – someone take that phone off that madman! Chinese stocks collapsed as the potential for a stall or even abandonment in US/China trade talks firms while currency markets were all over the place as risk sentiment inverted completely. The Shanghai

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Macro Afternoon

With mainland Chinese and Japanese stock markets closed its been a weak finish here in Asia going into the weekend with the Australian dollar making a new low, remaining under 70 cents while open stock markets basically returned scratch sessions. The focus instead will be on US and European markets tonight with the latest CPI

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Macro Afternoon

With the inversion of risk sentiment overnight following the latest Federal Reserve meeting, Asian markets were not expected to be boisterious today, not helped by the continued Golden Week holiday in Japan and with mainland Chinese markets also closed. Locally, the NAB profit release and cut in dividends sent the financial index and thus the

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Macro Afternoon

Not much to report today given that most stock markets are closed as the Golden Week holiday in Japan presses on, with both Singaporean and Chinese markets closed for a holiday.  Instead, the focus was local with ANZ reporting full year profits, up only slightly with lots of warning signs for the other divisions of Megabank