A mild selloff across Asian share markets today following the mixed action overnight due to the lack of direction from closed US markets. Focus on the Canadian imbroglio over the Huawei CFO court case brought the Yen buyers to the fore and saw risk currencies like Aussie and Kiwi to falter. The latest IMF growth
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 The PBOC are back on the weakening bent today with no news about the US/China trade talks or Trump’s shutdown not pushing currency markets around. The Australian dollar is flat lining at the mid 71s against USD, ready to make a new daily low as it moves to breakdown before Thursday’s unemployment
By Chris Becker The closed US markets due to the MLK holiday left risk markets floundering a little overnight with a pullback in European equities offset by higher oil prices. The newswires were dominated by the Chinese GDP figures and the latest IMF update to global growth risks, plus the usual Brexit imbroglio. Looking at
Asian share markets had a good start to the week today with green across the board, helped by the very positive sentiment on Wall Street on Friday, and a much stronger USD against domestic currencies. The ASX200 almost closed above 6000 points helped by a lower Aussie dollar in response to the Chinese GDP print
by Chris Becker The Chinese GDP print has seen the Australian dollar fall back to the Friday night session lows at 71.50: With Kiwi also falling: But stocks are still well bid in response to the surge on Wall Street on Friday night, although the ASX200 is now treading water. Amid all the GDP prints –
Asian shares finish the week with a flourish, with green results across the board as optimism grows over a potential positive outcome to the trade talks between the US and China. USD remains firm against the Asian major pairs with both the Aussie and Kiwi retreating while gold also fell a few dollars per ounce.
By Chris Becker European stocks were subdued overnight in immediate response to the late session slowdown here in Asia, while US markets got a bit more confidence towards the end of the session with speculation Trump is contemplating auto tariffs. Pound Sterling jumped as the UK government announced the next vote on the Brexit deal
The rally in Asian shares slowed this afternoon as comments from the Chinese commerce industry on the global slowdown took risk well off the table. The Australian dollar cracked to a new daily low while Yen rallied on the risk off mood, affecting domestic Japanese shares. The Shanghai Composite is down over 0.4% going into the close,
by Chris Becker Last night the US Dollar index (DXY) was largely unchanged mainly due to the lack of any catalysts because of Trump’s shutdown. The much watched December US retail sales were postponed but both Aussie and Kiwi lost against King Dollar, down nearly 0.4% or so each. Midday in the Asian session, the
By Chris Becker With the Brexit Parliamentary vote now a distant memory, and the US government shutdown pressing on regardless – with no key economic data being released as well – markets are focused on other matters like earnings reports, which have buoyed US stocks overnight. Stability came back to Pound Sterling while the USD
The risk on mood from overnight markets has not translated into any substantial gains here in Asia with most stock markets retreating although local stocks blipped higher due to a rise in bank stocks. Currency markets are somewhat back to normal as well after the big moves in Pound Sterling overnight while gold retreated slightly.
By Chris Becker With the UK parliament Brexit vote dominating markets overnight – particularly currencies – sentiment picked up as US markets opened and OPEC made some gestures towards production cuts, helping oil prices as US tech stocks pushed higher. The USD lifted slightly against the majors, with Pound Sterling obviously having the most volatility, while
It’s damn the torpedoes and full speed ahead as risk markets go into tonight’s Brexit vote with a lot of confidence, as the return of Japanese markets helped buoy the risk complex across Asia today. Yen sold off helping Japanese stocks while the Aussie dollar advanced slightly and Pound Sterling remained high in advance of
by Chris Becker With Japanese markets reopening today but the Brexit vote later tonight, markets are pushing a risk-on mood with stocks up: S&P futures are spiking, up 0.5% or more: And risk proxies Aussie dollar and US Dollar/Japanese Yen (USDJPY) also lifting: The PBOC has fixed the Yuan at about where it was yesterday
By Chris Becker Wall Street finally stopped climbing last night, with the weaker than expected Chinese trade data and caution over the upcoming Brexit vote taking confidence off the table. Further slow news on European industrial production saw the Euro taper further, while US Treasuries remained solidly bid as gold and Yen as safe havens also
A relatively quiet start to the week here in Asia with Japanese markets closed and news dominated by the latest Chinese trade figures which surprised on the downside, pushing Yen higher against USD, the Aussie and Kiwi. Further volatility is expected mainly on FX and bond markets tonight with continued pressure on Theresa May as
By Chris Becker It was a rebound week for global equities last week following the significant correction throughout December and into the New Year as the fallout from the Chinese/American trade war and the looming Brexit levelled confidence and risk taking. Friday night saw the release of the latest US inflation figures, with the CPI
A relatiovely positive session across stock markets in Asia today to finish the week, with the ASX200 the only laggard as the Australian dollar breaks through the 72 cent barrier against USD. Chinese stocks are up slightly as the Yuan makes a near six month high against USD as the PBOC strengthens the local currency
By Chris Becker After yesterday’s mixed session in Asia, equity markets tracked sideways for most of their respective sessions on both sides of the Atlantic overnight, with US stocks finally eking out a fifth in the row positive result. The USD rose against most of the majors, reversing its earlier week trend, although the Aussie
Mixed results across Asia today with Chinese stocks treading water, Japanese bourses retreating and the Australian market floating along even as the Aussie dollar keeps appreciating. The Shanghai Composite is down by only 1 point to 2564 points as confidence is wavering over a trade deal, still clinging above previous support at 2500 points. The Hang
By Chris Becker Trumps continued shutdown had no material impact on risk markets overnight with a fourth straight day of gains on Wall Street after the latest Fed minutes showed a relaxation of the continued interest rate hike agenda. This sent all the majors up against USD, which took the rug out from European equity
Trump’s address to the US in primetime had almost no impact on markets trading here in Asia, despite him not invoking the emergency use of powers to fund the wall (aka fence aka distraction device), thus setting up another stalemate with the polarised US Congress. Instead, markets are pivoting to any good news coming out of
By Chris Becker Treasury yields continued to climb for the third straight day, an indication that the Christmas bounceback in equity markets is under more solid ground, with modest returns on both Wall Street and in Europe overnight. Currency market volatility is subsiding as well although the Euro is being battered by the latest and
A fairly positive day on equity markets across Asia in response to the solid uptick on Wall Street overnight, although caution reigns as the US China trade talks get underway so Chinese shares are slowly retreating as Yuan appreciates against USD. The Shanghai Composite is down around 0.3% or so at 2524 points as confidence wavers,
By Chris Becker As the US-China trade talks get underway, sentiment in risk markets remained buoyant overnight, with USD retreating and oil rising more than 2% as equities continued their Christmas bounceback. The US government shutdown maybe nearing its end but this news has already been priced in, while currency markets are returning to more
A strong start to the week here in Asia in reaction first to Friday’s US unemployment print but then Chinese stimulatory support and the lower volatility on currency markets. Risk proxies like the Aussie and Kiwi are up despite the fall in the USDJPY pair, while Chinese equity markets advanced but not as strong as others,
by Chris Becker It’s the official start to the New Year after the two week break and of course, all the economists are out with their *predictions (YMMV) about the direction of the Aussie dollar. To wit, ABC: Citi’s Paul Brennan described the bank’s forecasts for the end of 2019 as “not particularly exciting, with
By Chris Becker Risk markets have undergone a massive shift in sentiment on Friday night due to two major factors: the solid US jobs number followed by Fed Chairman Powell’s comments which were both reassuring and extremely supportive. The volatility swung the other way with US markets closing at least 3% higher across the major