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

Stock markets are generally buoyant across Asia today with a few macro releases, including Australian construction data, disappointing to the downside, but having almost no effect on risk taking. The Shanghai Composite is up nearly 1% going into the close, taking back most of the previous losses to remain above 2900 points at 2964. The Hong Kong

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Australian dollar falls as 4Q GDP tanks

by Chris Becker The Australian dollar has rebuffed the 72 cent level against USD after the release of the 4Q construction activity report this morning: This big miss will be recalculated by the market as many investment houses will race to review their RBA rate calls and hence put a headwind in front of the

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Macro Morning

By Chris Becker  Risk markets remained in a holding pattern overnight with US stocks largely unchanged as Treasury yields and USD moved lower, with Fed Chair Powell’s testimony to Senate restating the Reserve’s desire to keep rates on hold. The possibility of a Brexit delay sent Pound Sterling zooming, lifting Euro in sympathy. Looking first

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Macro Afternoon

The good mood from overnight on the basis that the US/China trade talks are progressing forward has turned here in Asia, with red across the board. Stocks have declined, with Chinese bourses in the lead as the Yuan fix strengthened considerably, while Pound Sterling rockets higher on the possibility of a delayed Brexit. The Shanghai

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Australian dollar falls as Yuan strengthens

by Chris Becker The Australian dollar kept rolling higher yesterday after a substantial bounce off monthly lows last week, buoyed by the potentiality of a definitive outcome in the dragged out US/China trade talks. Indeed, up until the Sydney open this morning, where Pound Sterling spiked on the potential news in a postponement of Brexit,

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Macro Afternoon

Asian share markets were given a boost this morning with some progress on the US/China trade talks, building on the positive mood on Wall Street on Friday night, with the Chinese Yuan firming to new six month highs against USD. The Shanghai Composite is up more than 4% going into the close, soaring above 2900

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Macro Morning (Trading Week)

By Chris Becker  Looking at Chinese stocks first, where last week saw the Shanghai Composite shoot higher after its recent breakout, getting slightly above the 2800 point level as confidence returned.   This was mainly due to more optimism over the US/China trade talks plus the possibility of more internal stimulus, as confidence continues to build

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Macro Afternoon

Asian share markets are following the overnight lead with some mild falls and scratch results across the region. The USD rallied against Yuan and Yen, whereas the oversold Aussie has had a little bounce back following the Chinese coal debacle. The Shanghai Composite is steady going into the close, basically up only a handful of

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Macro Afternoon

Asian stocks generally rose across the region with most activity in currency markets as the Chinese coal closure and the latest domestic unemployment print pushed the Australian dollar all over the place. The Shanghai Composite fell in the latter half of the session, falling 0.3% to close at 2751 points as its bear market rally pauses.

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Macro Afternoon

Asian stocks basically moved together today with solid gains across the region, save Australia as local stocks were pushed down by a higher domestic currency, while gold almost hit $1350USD per ounce. The Shanghai Composite is tracking well, up 0.2% to close at 2761 points as its bear market rally continues. The Hong Kong Hang Seng

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Macro Afternoon

Asian stocks could not build on their boisterous start to the week with a flat session across the region due to the lack of lead from US markets which were closed overnight. The USD surged however with all pairs falling including Yuan which the PBOC again weakened. The Shanghai Composite is basically flat, down about

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Macro Afternoon

A boisterous start to the week here in Asia with almost all stock markets following the big night on Wall Street on Friday. This was despite growing macro concerns with Japanese machine orders falling, another possible round of tariffs from Trump and a slump in Chinese car sales. The USD continued its slide, albeit at

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Macro Morning (Trading Week)

By Chris Becker  Looking at Chinese stocks first, where last week saw the Shanghai Composite returned after being close for most of the previous week due to Chinese New Year holiday. The result was a solid breakout above the high moving average and key resistance on the weekly chart at the 2600 point level, closing

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Macro Afternoon

Not a good finish to the week here in Asia with all stock markets reporting a loss as pessimism around any trade deal between the US and China builds, with Trump’s focus on domestic issues and creating an “emergency” as political theater. The USD has reversed again with gold prices lifting slightly. The Shanghai Composite

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Macro Afternoon

A mixed day here in Asia with most stock markets treading water as everyone awaits the outcome of the ongoing US/ China trade talks plus the possibility of another Trump shutdown later in the week. The Shanghai Composite finally put in a scratch session after riding a big wave all week, closing just a few

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Macro Morning

By Chris Becker  Risk markets are still floating along on a positive sentiment vibe while the USD reversed course overnight, surging against the majors and knocking gold back to its lowest level in two weeks. Treasury yields continue to climb, now above 2.71% as the latest CPI print came in a little hotter than expected.

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Macro Afternoon

Another solid day on stock markets across Asia following the moves higher on Wall Street overnight with Chinese stocks leading the way as expectations for the US/China trade deal become more positive. The Australian dollar launched on the sentiment survey while the Yuan remained firm against USD. The Shanghai Composite closed nearly 2% higher, making big

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Macro Morning

By Chris Becker  Risk markets were buoyed last night by another government shutdown aversion and hope that the US/China trade talks will amount to something, as rationale repairs Trumps ridiculous policies. The USD reversed course as a result, with both Pound and Euro surging, while US Treasury yields lifted again to a new weekly high.

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Macro Afternoon

The poor showing on Wall Street overnight was brushed aside here on Asia with solid lifts across all stock markets today with a big return from Japanese stocks due to the long weekend and much weaker Yen. The Shanghai Composite is up nearly 0.6% going into the close, currently at 2671 points and building on

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Macro Morning

By Chris Becker  Risk markets are very mixed with a stall on Wall Street not replicated in Asian or European markets, with the latter helped by a much stronger USD. Although US Treasuries sold off slightly, the lessening prospect of any further interest rate rises by the Fed was overshadowed by concern of the continuining

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Macro Afternoon

A mixed start to the week on risk markets here in Asia with another public holiday in Japan taking a lot of volume off the table, while the welcome return of Chinese markets is seeing confidence lift, at least on the mainland. The USDCHF pair had a big flip higher on what looks like another

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Macro Morning (Trading Week)

By Chris Becker  Looking at Chinese stocks first, where last week saw the Shanghai Composite closed for most of the Chinese New Year holiday, reopening on Friday with a solid close to be 1% higher and continuing to stabilise above tentative support at the 2600 point level. With the US/China trade talks the main focus, possibly

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Macro Afternoon

The lack of progress in both the Brexit no-deal and the US China trade talks continues to weigh on risk markets with overnight losses festering into the Asian session today as some Chinese markets return from holiday. In currency land most undollar assets are unchanged but the Aussie dollar is failing against the crosses, notably

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Macro Morning

By Chris Becker  Risk markets are selling off going into the end of the week with a lack of progress on the US China trade talks to blame while the European Commission downgraded their latest growth forecasts. A run to safe havens was the result overnight with US Treasuries rallying while European currencies stabilised after

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Macro Afternoon

The biggest loser in the Asian session today was the Kiwi on a big job number miss first up this morning, falling more than 100 pips against USD and AUD. Aussie stocks lifted on the back of a much weaker Australian dollar and a continued rebound in bank and financials. US and Eurostoxx futures are