The overnight pullback on risk markets in the wake of the Trump “diplomacy” over North Korea has translated into similar moves here in Asia, although Japanese stocks fared better than expected as Yen weakened against USD throughout the session. The weaker USD is keeping commodities steady, including gold and the Aussie dollar. The Shanghai Composite is still
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’s sudden cancellation of the summit with North Korea caught markets a bit unawares, sending European stocks down while US bourses recovered later in the session. Oil prices tumbled however as the USD was mixed against the majors, with a bounce in gold prices rounding out the volatile overnight session. Recapping stocks
Trade deals are front and centre of worries on Asian markets today on the back of the Fed’s release of its latest minutes, which seem to be pushing out the June rate rise. Treasuries remain poised at the 3% yield level while the USD remains strong, stocks are mixed going into the European session. The Shanghai
By Chris Becker It was looking like another bad night on Wall Street before the latest FOMC minutes helped push stocks higher later in the session as the board revealed their lack of follow through on raising rates. The USD rallied anyway against most of the majors, although the Aussie dollar is looking bullish again.
Its looking more and more like risk-off as Asian markets retreat in line with US markets overnight, the possible breakdown of talks on the Korean peninsula and the US growing trade war with China the likely catalysts. The Shanghai Composite slumped after a minor pulback below strong overhead resistance at 3200 yesterday, falling over 1.4% to
By Chris Becker US stock markets retreated late in the session on news that the Korean summit may not be going ahead, pulling the USD down with it as commodities remained relatively stable. The undollars like Euro and Yen lifted only slightly while gold was still depressed and steady. Treasury yields were also unmoved above
Asian stocks have not translated the firm gains on Wall Street overnight, with falls across the region as currency markets shake out a recently weaker USD. A stronger Yen and Aussie have pushed down their respective bourses, while gold remains depressed. The Shanghai Composite gave up its previous gains to fall about 0.7%to 3192 points
By Chris Becker US stocks took the positive mood in Asia yesterday but ignored a mixed session in Europe to close higher, although tech stocks dragged the chain compared to industrials. The USD had a strange evening however, with both the Aussie dollar and Euro rallying and rebounding respectively from the Monday morning gaps, Yen was
A generally positive day across Asia to start the trading week. The USD advanced against the major currencies and gold, helping inversely correlated Japanese stocks while local shares floundered. The Shanghai Composite is up nearly 1% or about 25 points at 3215, finally out of the shadow of very strong overhead resistance at 3200 even, giving the impetus for a
By Chris Becker A week defined by a near 10 year high in US Treasury yields and a resurgent USD, which put pressure on equity markets around the world. Gold has cracked, as has Euro into new multi-week lows and its setting up for another uptrend in USD which will impact commodity prices. In Australia,
Another mixed session here in Asia as the week draws to a close with Japanese stocks advancing while Chinese and satellite bourses like the ASX200 scratch along for the ride. Its all about interest rates, the USD and emerging markets at the moment as the ten year high in Treasury yields begins to bite on
Asia markets have not been able to translate the firm gains on US markets overnight to the region, as the weaker Yen was able to only lift Japanese bourses. The monthly jobs figure in Australia saw the Aussie dollar lift higher strangely enough as the ASX200 was pushed down again. Tonight the focus will be
By Chris Becker A much better night on risk markets in response to some secondary reports in the US regarding industrial production with housing starts overperforming and oil inventories shooting to the underside, lifting oil prices and hence energy stocks. European markets were mixed as the Euro dropped on the new Italian government while gold
Yet another mixed day here in Asia as tensions rise once again on the Korean peninsula and the impact of higher US interest rates from the spike in Treasury yields is felt across risk markets. Only the ASX200 put in a positive session with gold putting in a small rebound from its sharp selloff overnight.
By Chris Becker A double whammy of economic releases overnight saw another retreat in risk markets as the USD soared against the majors, while gold went to a new four month low. While European Q1 GDP came in on target, German GDP underperformed alongside industrial production figures signalling some internal weakness in the EZ. In
Quite a mixed day here in Asia given the lack of volatility in overnight markets with the only bright light being mainland Chinese shares on the back of solid April data. Other stock markets had small declines as the major currencies tread water against USD. The Shanghai Composite had a late afternoon attempt at breaching the next resistance
By Chris Becker A night to forget on overseas markets with both US and European stocks putting in scratch sessions across the board. The USD came back on strength against the major currencies however, with the Aussie dollar particular back under stress again after last week’s very minor comeback. US Treasury yields pipped above 3%
Risk markets lifted all across Asia, starting the week on a strong point. This has yet to translate to higher futures on European or US stocks, but the mood should be optimistic going into the City open. The USD remains slightly weaker from its reversal late last week, as all eyes are on further trade
Outside mainland China its been a solid day again here in Asia, with stock markets finishing their best week since February. Currencies were largely unchanged with gold prices also slipping, but futures are looking good going into the European session. The Shanghai Composite was unable to breach the next resistance level at 3200 points, losing about 0.3%
By Chris Becker The poor CPI showing in the US saw the USD stumble from its recent rally, but sent stocks to a near two month high. Pound Sterling was a standout though, dropping on the BOE holding steady, while oil prices stabilised. Recapping stocks in Asia yesterday where the Shanghai Composite had another attack
Another solid day for risk markets here in Asia, taking the US lead overnight. The Chinese CPI print disappointed on the downside, with the USD losing some ground against the Aussie but not Yen or other majors leading into tonights BOE meeting. Geopolitical risks are coming to the fore again with Malaysian elections and tensions
By Chris Becker Oil was the catalyst overnight with industrial stocks lifting alongside as a DOE report indicated much lower inventory levels than expected. WTI crude cracked the $71USD per barrel level while Treasury yields rose as well on the risk on move, pipping above the 3% uncle point again. The USD was mixed against
A mixed day here in Asia with stocks exchanging wins for losses across the region in the wake of Trump’s dumping of the Iranian nuclear deal. Oil prices are starting to spike going into the European open alongside a rally in the USD and Treasuries. The Shanghai Composite had a scratch session today, closing a few points
By Chris Becker Overnight markets were shaken, but not stirred, by President Trump’s reneging on the Iranian nuclear deal. Stock markets on both sides of the Atlantic finished slightly down or with scratch sessions, and while oil prices were volatile they did not falter either with WTI crude remaining above $70USD per barrel. Futures are
The impact of the higher USD continues to weigh on developed markets, but the big stock bourses in Asia continued their rebound as futures for European and US stocks advanced. Oil prices are the markets to watch, with WTI hovering around the $70USD per barrel level and Brent above $75 as traders await the Trump
By Chris Becker Overnight stock markets responded positively to the great start to the week here in Asia with rallies on both sides of the Atlantic. The USD topped to a new calendar year high while oil prices came along for the ride while bonds also pushed higher as Treasury yields pull back further from
The fallout from the US unemployment print on Friday has been quite positive, with all stock markets closing higher here in Asia. The USD remained steady against the majors, as most of the action was priced in the late Friday session. Commodities were relatively stable as well while the bond market lifted with the Aussie