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 A mixed night on overseas markets with risk taking somewhat of a holiday in anticipation of the US mid-term elections, with the USD and bond yields falling while stocks kept treading water. The US ISM services print was very encouraging while Brexit negotiations were cooled once again on the Ireland border question.

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Macro Afternoon

It’s been an interesting start to the week here in Asia with minor falls across the board on stock markets, with currencies also moving sharply around on the trifecta of Brexit news, BOJ Kuroda’s press conference and the reaction to Friday night’s non-farm payroll (NFP) report, aka US unemployment. The Shanghai Composite is down over 1%  going

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Macro Morning (Trading Week)

By Chris Becker  A very strong non-farm payroll (NFP) report on US unemployment on Friday night did not help the nascent recovery on equity markets. US markets fell around 1% after gaining more than that on almost every session during the week, with the USD reversing what had been a steep selloff against the major

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Macro Afternoon

A somewhat mixed end to the week here in Asia with most stock markets rising the wave of confidence that has set in on Wall Street earlier. Despite advancing local currencies due to a reversion in USD sentiment, plus falling oil prices, stocks look set to build from here – if tonight’s US unemployment print

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Macro Morning

By Chris Becker Reports of a potential Brexit deal, plus solid earnings by Apple overnight saw the risk sentiment shift higher, with the USD the main casualty. All the major currencies surged against King Dollar, particularly Aussie, while oil prices fell by nearly 2% on rising supply pressures. It looks like another risk positive day

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Macro Afternoon

Outside Japan it’s been a positive session on Asian stock markets today with domestic earnings troubles and a slightly stronger Yen the headwinds. The rest of the region is continuing the overnight bounce from Wall Street as traders struggle to build their confidence after an awful (if you’re long only) October. The Shanghai Composite was moving higher

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Macro Morning

By Chris Becker Overnight saw a continuation of the equity bounce with US shares up nearly 2% while the USD firmed against all the majors and Treasury yields remained at their lofty highs. EZ CPI came in bang on target, but that didn’t help the Euro which flopped to a new weekly low, while the

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Macro Afternoon

The bounce is here in full with a sea of green across Asian stock markets today, navigating through a steady BOJ interest rate meeting and a somewhat disappointing Chinese manufacturing PMI print. Australian inflation figures – out of date given it’s quarterly – didn’t move the Aussie dollar that much either. The Shanghai Composite is moving higher,

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Macro Morning

By Chris Becker Overnight saw a big bounce on Wall Street late in the session, as commodity prices retreating on continued US-Chinese trade talks. The equity correction is not yet over but there are signs of selling exhaustion taking place on both sides of the Atlantic, with futures indicating a similar bounce here in Asia

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Macro Afternoon

Here comes President Trump to save the day – so goes the refrain, even though the blame for this correction lays squarely in his ample lap. The idea of a better “deal” with China is giving stocks a boost across the region, with the Yuan now into a ten year low against the USD as

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Macro Morning

By Chris Becker Another volatile night on markets with European stocks leading a bounceback that then faltered before crashing on Wall Street with a very late “Hail Mary” recovery in the last hour of trading. Currency markets were not as crazy but the USD is reasserting itself against all the majors, a small bounce on

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Macro Afternoon

Quite a mixed start to the week here in Asia with mainland Chinese stocks falling swiftly, while the rest of the region is putting on minor gains, the ASX200 the standout, as some confidence returns. The USD is retreating slightly against the majors, with the Aussie dollar spiking, following on from its Friday night reversal.

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Macro Morning (Trading Week)

By Chris Becker  It’s not been a good week if you’re a long only holder of stocks, with rising volatility spilling over into some frenetic selling on Wall Street and other interconnected markets. Friday night saw another bad finish to the week with US stocks now at a six month low, tech stocks leading the

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Macro Afternoon

It’s not been the bounceback that we expected here in Asia with mixed results on stock markets across the region. The yuan dropped to a 10 year low, almost hitting the 7 handle versus the USD, while the Aussie dollar dropped to a two year low as the USD flexes its muscles. The Shanghai Composite is

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Macro Morning

By Chris Becker Another bounceback overnight but will it stick as stock markets remain in shock with too may series of volatile sessions starting to exhaust traders (me included). Tech stocks led the way with the NASDAQ lifting nearly 3%, while Treasury yields spiked again while currencies were relatively calm as the ECB stayed the

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Macro Afternoon

It’s been a tough day for the long only crowd in Asian shares across the region, with falls of a similar magnitude to those of Wall Street overnight. Volatility in FX markets has been sanguine however, with the Aussie  bouncing slightly while the Kiwi deflates in the wake of the equity selloff, although this lack of

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Macro Morning

By Chris Becker The equity correction ramped up significantly overnight with big outsize falls on Wall Street, the NASDAQ off by more than 4% (although Tesla did well on its profitable quarter) while the broader S&P500 lost over 3%. This does not bode well for Asian stocks today with runs to safe havens like Yen

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Macro Afternoon

Stock markets continue their topsy turvy ride with a bounceback here in Asia following a very nervous night on Wall Street. Chinese stocks are leading the charge while a lower Yen is helping Japanese bourses, the USD is also weakening against the Aussie and the Kiwi. The Shanghai Composite did well at the start of the

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Macro Morning

By Chris Becker The equity correction continued overnight with steep falls on Wall Street that were barely covered by the end of the session, with oil prices cratering in the wake of the Saudi’s murderous own-goal. This finally caused a rush to safety in Treasuries, with the 10 year yield falling to 3.11% and the

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Macro Afternoon

The dead cats are piling up faster than a PETA shelter can shovel them with equity markets in Asia in reversal mode in what has been a quiet day in terms of economic and geopolitical catalysts. This is mainly due to the lack of a rebound on Wall Street overnight, and the surge in USD

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Macro Morning

By Chris Becker US markets set the mood overnight, one of nerves and risk aversion with the S&P500 retracing back to a two weekly low, while the USD gained against all the major currencies. Treasury yields remain elevated, but largely unchanged, while the chance of another Fed rate hike in December rose again overnight. Oil

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Macro Afternoon

Outside Australia it’s been a much better return to form for equities here in Asia, particularly in China which has extended its bounce from Friday in both Hong Kong and the mainland, mainly on the back of a proposed new tax plan for households to stimulate the economy. FX markets have been generally positive for

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Macro Morning (Trading Week)

By Chris Becker  You could call activity on equity markets last week as a return to stability, but that’s a stretch, as confidence remains cratered. A variety of macro and country specific risks continue to rise, from the Saudi’s malelovence impact on oil prices, Chinese share prices now in their fourth year of a bear

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Macro Afternoon

Outside of China it’s been a poor finish to the week for Asian share markets, with the fallout from the US selloff and “bondcano” still being felt across the region. Chinese GDP data was slightly less than expected but did not translate into falls on the mainland or in Hong Kong, while a lower Yen

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Macro Morning

By Chris Becker The correction is back as US stocks led the selloff overnight, Treasury yields came back slightly while the USD rose against most the majors as risk sentiment retreated back to the mean, with Yen getting the safe haven bid. Sadly for the Saudis, oil prices continue to crater with WTI and Brent

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Macro Afternoon

The bounce in equities has been shortlived with only the Australian market not dipping into the red this afternoon, with local employment data keeping the bears away for another day. A weaker Yuan fix plus reduced confidence has seen Chinese stocks selloff sharply while gold is holding on, other undollar assets are falling heading into

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Macro Morning

By Chris Becker USD came back to strength in the wake of the hawkish FOMC minutes, quickly taking the legs out from under the tentative bounceback in equity markets. All the major currencies slipped against King Dollar with oil prices also falling on the back of Pompeo’s mewing with the Saudis. Treasury yields continue to

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Macro Afternoon

Finally, a decent rebound in stock prices in Asia, as markets follow the dual European/US mood and lift across the board. The problem is with Treasury yields still not lowering and the USD remaining weak, can this bounce be sustained through the week with another earnings season around the corner. The Shanghai Composite finished the session up

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Macro Morning

By Chris Becker Here comes the bounce with tech stocks leading the charge on Wall Street, exhausted selling on equity markets has turned into frantic short covering with big moves overnight. Despite the good mood, Treasury yields continue to lift higher while the USD advanced against traditional safe havens, the Aussie and Kiwi remain surprisingly

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Macro Afternoon

A mixed day here in Asia which is better than red across the baord with Japanese stocks leading the way, pulling along local shares as the USD recovered slightly. The Chinese CPI print picked up slightly as the PBOC signalled its intend on defending the major 7 handle on the Yuan against USD, with the official