No big news to move stocks around here in Asia, just a series of headlines over Chinese trade, Brexit and local politics to get through another trading day. Interestingly, the CBOE has increased oil future margins, which is a case of closing the door after the horse has bolted, while the latest New Zealand trade
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 Oil prices finally bounced, with tech stocks on Wall Street also surging as US Treasury yields spiked in the wake of a return to confidence following the retail orgy over the weekend. Risk was focused in Europe with Mario Draghi again apprehensive of the moderation in recent economic data, while concerns over Brexit
A weekend without much bad news has translated the poor showing on Wall Street to a buoyant day on stock markets here in Asia today, with just the local Australian markets suffering. The PBOC loosened the Yuan fix substantially while the failing Bitcoin had a big bounce this morning. The Shanghai Composite is down 0.3% to 2572 points
By Chris Becker Looking at Chinese stocks first, where last week saw the Shanghai Composite failed to stabilise above tentative support at the 2600 point level, having started the week nearer 2700 points. The bearish bias remains as momentum continues to suggest another downturn here in the wake of the Chinese/American trade negotiations: Japanese stocks are wilting here
A very mixed day here in Asia with Japanese markets closed and not much else happening due to the US holiday overnight, although oil prices have already retraced and Chinese shares are off due to domestic concerns via the PBOC of a slowing global economy. The Shanghai Composite is down over 2% to 2579 points going into the
By Chris Becker With the US Thanksgiving holiday, markets were relatively quiet overnight, although European bourses suffered from the continued lack of confidence on the Brexit saga, with a new summit scheduled this weekend. Pound Sterling jumped regardless while other currencies were basically unchanged as oil prices remain depressed. Recapping Asia’s session yesterday where the Shanghai Composite
Asian stocks have been mixed throughout the session today as trading volume dries up in preparation for the US Thanksgiving holiday as risk sentiment remains fragile. The USD kept up the bid with the Aussie and Kiwi dollar pushed lower while Yen buyers stepped in slightly, not affecting Japanese shares. The Shanghai Composite is down a few
By Chris Becker Risk markets stabilised somewhat overnight with US tech stocks leading a slight recovery on Wall Street while oil prices stopped falling and US Treasury yields blipped a few points higher. Major currency pairs also had a small bounceback although this fizzled in the latter half of the session, with Pound Sterling remaining
Asian stocks didn’t perform as badly as predicted, still losing ground but not in the magnitude of the falls on Wall Street and the continent overnight. The falls in the antipodean currencies – Aussie and Kiwi – were mitigated this morning while oil looks like finding a potential bottom after the bath of blood from
By Chris Becker Dead cats are piling up on Wall Street, led by tech stocks with Apple down nearly 4% with European tech issues also pulling markets down across the Atlantic. Brent crude fell 7% with WTI crude not far behind, also acting as a headwind with energy stocks losing, while US Treasuries almost reverted
Following the rout in tech stocks in the US overnight, Asian bourses have fallen throughout the session as risk appetite dissapates. Governor Kuroda at the BOJ has ruled out any further easing of its negative interest rate policy which kept Yen relatively stable while the Aussie dollar fell on the latest RBA minutes. The Shanghai Composite is
Stock markets in Asia are generally in a positive mood, absorbing the failed APEC conference with aplomb and the notably volatile Brexit drama from the weekend. But is this the calm before the storm? The Australian dollar has maintained its Friday high while the local stock market was the standout in a poor start to
By Chris Becker Market sentiment remains cautious as we end into the final trading weeks of the year with US stocks barely lifting on Friday night amid more tensions in Europe over the Brexit drama saw continental bourses drop once more. More buying of US Treasuries and Yen as safe havens remain the choice for
Most stock markets here in Asia look like finishing the week on a high note, save Japanese bourses as Yen buyers doubled down throughout the session, hurting domestic stocks. The USD is still under pressure on the other majors with both Aussie and Kiwi advancing, while we await the fallout from Brexit tonight as volatility
By Chris Becker The Brexit saga could not overshadow risk appetite overnight with US stocks finally rebounding after a staid week, helped by a very strong advanced retail sales print and some “easy” Fed speeches possibly putting brakes on an unrelenting rising rate policy. Pound Sterling was slammed on the Brexit dramas, falling over 300
Stocks are higher here in Asia despite the mixed mood from overnight, with Chinese equities leading the way. Locally a fall in the unemployment rate sent the Aussie dollar higher while other major currency pairs are gaining ground against USD in the wake of the new Brexit deal. The Shanghai Composite has closed 1.3% higher to 2667 points,
By Chris Becker Another poor night for equity markets with news of the Brexit deal impacting European bourses in a perverse way, rallying before realising it’s not that good and selling off into the close. The US CPI print did not cause a flutter with currencies reacting more to the EZ CPI and GDP prints
Stocks across the region were mixed today with the local bourse falling nearly 2% on the back of another rout in banks, while the trifecta of Chinese data also proved a little dicey even though on most metrics they were good figures. The oil price and their effect on energy stocks plus the Brexit deal
By Chris Becker Two catalysts overnight that would normally be positive couldn’t turn around the risk off mood with US stocks stalling after European markets jumped near the close as a Brexit deal was hatched out. A new round of talks between the US and China on trade is supposed to be optimistic, but it
By Chris Becker A poor start to the trading week for overnight markets with US stocks selling off sharply on the back of tech giant Apple and confounded by falling oil prices that are hurting energy stocks. Brexit negotiations are also fouling up the roost in Europe while the USD is soaring against the major
By Chris Becker A week after a very strong non-farm payroll (NFP) report that then solidified the Federal Reserve’s intentions at the subsequent FOMC meeting to normalise rates has seen some semlbance of stability on equity markets, although Friday night saw a small tumble. The USD is back in town as all the majors correct
By Chris Becker The November Federal Reserve meeting came and went with no fanfare, as expectations remain nearly locked in for a rate rise in the December meeting instead. Nevertheless, the USD rallied against most of the majors and gained back some ground, particularly against Euro and Pound Sterling. Stocks were mixed on both sides
The reaction to the US mid-term elections has been positive for risk markets in Asia, with stocks rising across the board while the USD floundered against the majors. The Kiwi has moved to a three month high while the Aussie is riding high on a wave of USD weakness. The Shanghai Composite is up slightly going into the
By Chris Becker As expected, stock markets rallied following the near predictable result of the US mid-terms, although the post close resignation of Attorney General Jeff Sessions hasn’t been absorbed, neither the near insane press conference put on by Trump this morning. But it’s the sugar kick that was to be expected, with US stocks
The US mid-term elections – or divorce proceedings in other words – have caused a bit of havoc on risk markets here in Asia, with currencies the most volatile. The USD has moved around substantially against both Aussie and Yen while the Kiwi rose significantly on a very good employment report, making tomorrows RBNZ meeting
By Chris Becker Trading was thin on the ground overnight as Americans headed to their mid-term elections, with Treasury yields lifting slightly – the 2 year looks set to cross 3% soon – while the USD retreated against everything but Yen. European stocks fell back slightly with oil prices falling sharply again, both Brent and
It’s been a mixed session here in Asia with Chinese stocks falling while Japanese markets lifted as Yen waned on a strengthening USD. The other majors are relatively unchanged though leading up to the US mid-term elections which are sure to ramp up volatility across risk markets. The RBA held at its meeting this afternoon