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.

2

Macro Morning

By Chris Becker  Last night saw risk markets try to breakout of its recent contained mood with US stocks putting in scratch sessions as European bourses found some more risk as Euro and Pound Sterling retreated against USD. Industrial production figures from the US is partly to blame on the spoiling mood while the German ZEW Survey

84

Macro Afternoon

A lot better conditions here in Asia today with Chinese markets rebounding on the expectation of much better economic data while the Australian dollar was the biggest currency mover on the release of the RBA Minutes, sending the Pacific Peso down over 30 pips. The Shanghai Composite has rebounded sharply by climbing over 2% to close

4

Macro Morning

By Chris Becker  Last night saw risk markets in a contained mood without much activity with both sides of the Atlantic putting in scratch sessions on stock markets while currencies were range bound as no significant economic events were reported. Treasury yields were also relatively unchanged with Fed futures still stuck on an even chance

37

Macro Afternoon

Outside China it’s been a fairly good run across stock markets here in Asia to start the week, absorbing the weekend news and lifting on the risk-on Friday mood. The USD continues to weaken against almost everything but gold, which is facing a near three month low as buying support evaporates. The Shanghai Composite has

1

Macro Morning

By Chris Becker  Friday night saw US stock markets rise on the back of strong bank earnings to a new six month high. US Treasury yields rose past the 2.5% barrier again while the USD fell against everything but Yen, confirming the risk on mood. Looking first at the Asian session on Friday which saw

47

Macro Afternoon

Another very mixed session here in Asia as traders position themselves before US earnings tonight with the overnight surge in USD continuing against the commodity currencies, although Euro is coming back late in the session. The Shanghai Composite is set to close below 3200 points again, putting in a scratch session while the Hang Seng Index has continued

0

Macro Morning

By Chris Becker  A big surge in USD overnight took the wind out of US stocks with Wall Street’s anticipated earnings season looking at a shaky start. The delayed Brexit result has seen volatility in Pound Sterling reduce, but the German government’s slashing of growth forecasts took the floor out of Euro. Today’s RBA Financial

32

Macro Afternoon

Another mixed session here in Asia with Chinese stocks retreating the most, while Japanese bourses stabilised, local markets were wary of the Scomo election call, with the Australian dollar tapering slightly from its overnight surge. The Shanghai Composite has closed 1.5% lower to just below 3200 points, reacting poorly to the expected CPI print, while the Hang

2

Macro Morning

By Chris Becker  Overnight markets rebounded slightly with US equities leading the charge as the latest FOMC minutes repeated a “patient stance” while core inflation data was subdued, leading to falls in Treasury bond yields and the US dollar. The ECB held fire but again noted downside risks to growth, with the Euro and Pound

40

Macro Afternoon

Its a mixed reaction across risk markets here in Asia after the dip in stock markets overnight with Japanese stocks the only bourses in retreat, while undollar assets like gold, Aussie and Kiwi all advance against the USD. The Shanghai Composite has closed up a couple of points to 3240, starting in the red but still

0

Macro Morning

By Chris Becker  It only took Trump throwing his weight around with more threats of tariffs on Europe offsetting the potential year long delay of Brexit overnight. Not helping was the IMF again dropping its growth forecasts which sent US Treasury yields dropping substantially as currencies were somewhat volatile but finished the day almost unchanged.

21

Macro Afternoon

Stock markets have had a generally positive day across Asia, mimicking the small advances on Wall Street overnight as the USD slipped against the majors, although a stronger Yen continues to provide a headwind to Japanese stocks. The Shanghai Composite has closed down a couple of points to 3239, still unable to gain any headway following

0

Macro Morning

By Chris Becker  Volatility was subdued on overnight markets with the lack of any real news apart from growing instability in Libya which saw oil prices spike, while the USD retreated slightly alongside US Treasuries. With a Brexit deadline stretched further and no news = no volatility, Pound Sterling was largely unmoved, although Euro pipped

31

Macro Afternoon

Risk markets have reopened across Asia after the weekend gap and its been a mixed session for stock markets with Japanese bourses retreating while the local ASX200 rebounded after its stumbling finish on Friday night. The USD has firmed against the majors except Yen which has strengthened, hence the drop in Japanese domestic stocks. The

0

Macro Morning

By Chris Becker  Stronger than expected US non-farm payrolls (employment) numbers on Friday night buoyed stocks across both sides of the Atlantic, while the USD firmed alongside bonds with Treasury yields falling across the curve. PM May asked for an extension to the Brexit debacle while backroom shenanigans keep Pound Sterling volatile and Asia-based traders

63

Macro Afternoon

Stock markets across Asia are mixed with the local ASX200 retreating while Chinese stock markets are closed for a holiday as Japanese bourses lift slightly. The USD is weakening going into tonight’s US unemployment print with Pound Sterling rising the sharpest. US and Eurostoxx futures are slowly rising going into tonight’s session with the four hourly chart of the S&P 500

0

Macro Morning

By Chris Becker  With risk now focusing on tonights US non-farm payrolls (employment) numbers, the bond market stabilised while US stocks stalled at their yearly highs as the ongoing Brexit talks, deals, votes and back stabbing continues apace. Looking first at the Asian session yesterday, where the Shanghai Composite lifted nearly 1% to remain well

37

Macro Afternoon

Stock markets are mixed across Asia as this bull rally takes a small pause with the ASX200 the biggest loser as the Australian dollar remains elevated post Budget night. The Shanghai Composite is up 0.9% going into the close at 3244 points, while the Hong Kong Hang Seng Index has retreated 0.5% to 29821 points after getting

0

Macro Morning

By Chris Becker  Risk markets have extended their rally overnight as the USD wanes against the undollar majors, although gold remains stalled, Pound Sterling made a weekly high on the back of another failed Brexit vote. The European wide services PMI print was not as disappointing as expected, although the US ISM version hit an

36

Macro Afternoon

Stock markets here in Asia keep advancing on hopes that a US/China trade deal can be announced soon with the USD losing ground against all the majors, particularly Pound Sterling, while gold remains in the doldrums, Bitcoin is moving closer to $5000USD. The Shanghai Composite is up over 1% going into the close to remain above

66

Macro Afternoon

A big breakout in Bitcoin is dominating the market wires this afternoon as Asian stock markets continue to rally as risk sentiment improves, despite the woeful mishandling of Brexit overnight in the UK parliament.  The RBA meeting came and went with no change except in language which saw the Aussie dollar fall below 71 cents

0

Macro Morning

By Chris Becker  It was a busy night on risk markets with the ongoing Brexit saga only providing profit to traders (and not much sleep!) as the UK Parliament again showed how sad the whole situation is with another “nuh-huh” vote on, well anything. Economic prints came back better than expected in the US with

14

Macro Afternoon

A big surge across the board here in Asia in response to the positive finish to the week on Friday night on Wall Street with Chinese stocks leading the way. The USD has retreated against the risk currencies, namely Kiwi and Australian dollar, but gapped higher against Yen, supporting the risk on mood. The Shanghai

0

Macro Morning (Trading Week)

By Chris Becker  A tumultous week on risk markets, with the Brexit saga leading the way as volatility on bond markets continues to push stocks and currencies around. The week ended on a much better note with US markets rallying behind hopes for a final deal on US/China trade, even though economic data continued to

29

Macro Afternoon

A much better than expected finish to the week here in Asia for share markets, with Chinese bourses leading the way while Japanese markets finally gain some strength following the USD wide rally that is suppressing Yen in the main. The Australian dollar remains stubborn while the Kiwi is also trying to get off its self

0

Macro Morning

By Chris Becker  Supposed good news surrounding the US/China trade talks plus an easing in the US Treasury bond rally saw a bid in risk sentiment overnight, with US stocks rallying while European bourses lingered. Gold sharply reversed alongside Pound Sterling as the Brexit stalemate continued. Looking first at the Asian session yesterday, where Chinese stocks

32

Macro Afternoon

Another very mixed session across Asian share markets as bond markets continue to rally while the USD is having a breather against Yen and Kiwi in particular, the former pushing Japanese stocks lower. Gold is trying to stabilise here above $1300USD per ounce while the Australian dollar is climbing back to the 71 handle after

35

Macro Afternoon

Asian share markets are having another mixed session despite the positive sentiment from overnight with all eyes still on the bond markets, particularly the Australian. The Aussie dollar took a dive in sympathy with the Kiwi as the RBNZ signalled another possible rate cut is on the way while Yen remained soft against USD. The

47

Macro Afternoon

Asian share markets are mixed following last night’s equally mixed session, with Japanese bourses bouncing the highest on the back of a slightly weaker Yen. The Australian dollar is rising the fastest amongst the undollars while gold has retreated slightly after getting ahead of itself last night. The Shanghai Composite is down 0.9% again going

0

Macro Morning

By Chris Becker  Volatility continued overnight with bond markets pushing the whole risk edifice around as US stocks retreated following a dour session here in Asia. The German IFO survey did better than expected which buoyed European stocks somewhat but this was overshadowed by the continued slow train wreck that is Brexit. Looking first at