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 Even a closed Wall Street couldn’t keep the bulls away overnight with European markets surging as the prospect of more economies opening up post-COVID19 overshadowed any concerns over the Chinese/US tensions. Currency and bonds were relatively stable, although gold lost further ground while industrial commodities lifted with oil prices hitting another new
Despite the rising tensions with China and the West over Hong Kong and the and a long weekend for US markets, risk is going all in again in Asia, starting the week with a flourish outside of the Middle Kingdom. In mainland China, the Shanghai Composite is off a handful of points, still hovering above
The AUD is up and away this morning, recapturing the mid-65s, former resistance, now support: Bonds have eased: Stocks jumped at the open and the chart is still bullish: Big Iron is loving making the rifles and cudgels of autocracy: Big Gas too: And Big Gold: Big Banks are caught an L-shaped recovery tractor beam:
By Chris Becker The Trading Week ended with a whimper on Friday night on Wall Street as tensions over the US/China relationship continued to simmer over as the rhetoric ramped up going into the CCP’s national congress. Meanwhile, the long weekend caused many traders to pare their positions with US stocks ending mixed, and Treasuries
DXY was strong Friday night markets braced for war in Hong Kong: The Australian dollar fell sharply but bounced as well: EMs continued their charge: Gold firmed: Oil eased: Dirt sdnk: Dirt sank: Big miners held on as their iron ore came back as rifles and bullets: EMs were hit: Junk eased: Bonds were bid:
It looks like the risk complex has had enough of buying, with all stock markets coming up against resistance and unable to push through, the catalyst today being the Chinese revision in official GDP growth targets, coupled with the clear death of freedom in Hong Kong. The USD continues to firm against all the majors
By Chris Becker Risk sentiment just can’t seem to get above the current elevated levels on stock markets around the world and are snaring back to reality everytime a macro issue raises its head. US stocks fell back nearly 1% overnight on US/China tensions and the rising coronavirus case load, with the USD reasserting itself
DXY firmed last night: The Australian dollar fell against all DMs: I’m not sure what happened to EMs: Gold fell: Oil wants higher: Dirt meh: Miners meh: EM stocks meh: The crazy EM junk bid stalled: Bonds were bid: Stocks fell: Westpac has the wrap: Event Wrap COVID-19 update: The global case count, according to
Stocks are slipping again, coming up against significant buying resistance as other risk assets like oil are still flying ahead as caution spreads across Asia. Gold also fell back as the USD strengthened against all the major currencies, with the Aussie also back to its prebreakout high. In mainland China, the Shanghai Composite is selling
The Australian dollar has reversed its overnight gains as the China stoush explodes: Bonds are bid: XJO is struggling to hold its breakout line: Big Iron is soft. If push comes to shove for iron ore blockades then it’s the marginal juniors that are in the gun: Big Gas is recovering: Big Gold is firm:
By Chris Becker Risk markets re-engaged the buy levers again with the release of the latest FOMC minutes providing a catalyst for further advances, Wall Street lifting nearly 2% while other risk assets like the Australian dollar and oil rose in kind with industrial metals mixed. Treasury yields fell back to historic lows again while
DXY was soft last night: Which helped the Australian dollar break out to new post-crash highs: EMs rallied: Gold is stalled at the break out line: Oil is firm: Dirt is breaking higher: Miners up: EM stocks broke out: Junk went mad: Bonds were bid: Stocks see nothing ahead but Nirvana: Westpac has the wrap:
Stocks were all over the place today, initially starting out rough with gap downs across the region before most recovered in late trading on optimism that Wall Street will pull the rest of the risk edifice along. Gold nudged higher for a new daily high towards $1750USD per ounce while the Aussie dollar was largely
By Chris Becker A hiccup in risk taking overnight as stock traders read the fineprint attached to the new vaccine news, coupled with steeper than expected declines in a variety of economic reports, namely housing starts, European unemployment and the closely watched German ZEW survey. Gold held on while other major currencies fell back slightly
DXY was still soft last night: The Australian dollar broke out then flamed out: Gold is still hovering: Oil fell: Dirt was firm: Miners too: EM stocks rolled: But junk powered on post-Powell: Bonds were bid: Stocks fell: Westpac has the wrap: Event Wrap COVID-19 update: The global case count, according to the latest data
The pandemic crisis is over:buy stocks! That’s the message from risk markets across the world at the moment, as stocks breakout of their holding patterns and all the short positions are wound back, while rational investors remain on the sidelines. In mainland China, the Shanghai Composite is up nearly 1% to be one or two
Westpac A$ ‘fair value’ midpoint hits a fresh 19yr low last week below 0.61 as falling swap rates/ rising risk aversion more than offsets higher iron ore prices. The A$ thus remains expensive above 0.63 for yet another week. #ausbiz pic.twitter.com/170Uj6zk3Q — Robert Rennie (@Robert__Rennie) May 17, 2020 Iron ore will put a dent in
DXY was belted last night: The Australian dollar universally flew: Gold was dumped: Oil to the moon: Dirt too: Miners! EM equity to the moon: EM junk to the moon! Bonds belted: Stocks to the moon but only Nasdaq hit record highs: Everything went right, via Westpac: Event Wrap COVID-19 update: The global case count,
A solid start to risk taking here in Asia with the usual Monday morning gaps absorbed with aplomb, especially viz currencies as investors look towards the Powell Put over the weekend, as the US Federal Reserve turns Japanese. In mainland China, the Shanghai Composite is up over 0.5% to start the week almost reaching 2900
By Chris Becker Friday night saw a relatively good end to a hectic week across risk markets with European stocks playing catchup while Wall Street lifted slightly, its optimism about economic life opening contained somewhat by the growing China/US trade dispute, nevermind the pandemic issues. Gold continued its significant breakout as all central banks seem
DXY was up Friday night and still looks very strong: The Australian dollar tumbled against every cross: Despite gold taking off: Oil too: But dirt sagged: Miners were bid: EM stocks are stalled: Junk fell: Bonds were soft: Stocks eked out a gain: Global data is still so bad that it is being ignored. We
A somewhat mixed day here in Asia with Chinese shares pulling back on the brouhaha developing between The Middle Kingdom and the Flailing Empire as Trump again ramps up the rhetoric on trade and other measures. The USD is strengthening somewhat going into the European open while gold continues to advance after its breakout last
By Chris Becker Last night saw a small return to risk taking late in the session following another dire initial jobless claims print in the US, as Wall Street continues to ignore the stark risks given by multitudes of viral scientists and the equally stark data coming out of “open for business” states like
Selling is the order of the day here in Asia with all stock markets lower by 1% or more in response to the selloff on Wall Street overnight, as traders weigh up more negativity around the “V” shaped recovery post-coronavirus. The USD is gaining against everything by safe haven Yen, with the Aussie dollar dropping
By Chris Becker Another sour night on overseas markets with Federal Reserve Chair Powell giving a reality check on the economic impact of COVID-19, causing a selloff across Wall Street as Chinese/US relations also took a dive. Currencies also bore the brunt of the volatility, although gold stayed true and fair to remain above