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 Afternoon

Another mixed day on stock markets across Asia despite the solid lead from Wall Street overnight with currency markets relatively stable as the latest Chinese data came in better than expected. The Shanghai Composite failed to make good on the trifecta of releases, down nearly 0.6% going into the close at 2956 points while the

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Macro Morning

By Chris Becker  Wall Street took back its previous mild losses overnight while European bourses were hesistant to move forward despite a supposed “new deal” for Brexit and a possible ceasefire in Syria.  While US stocks gained, Treasuries gravitated around the 1.80% level again, as Brent and WTI crude oil prices lifted solidly on the

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Macro Afternoon

A somewhat mixed day on stock markets across Asia as the poor lead from Wall Street and the drop in USD overnight seeing sentiment shift from the positive mood at the start of the week. Today’s better than expected unemployment print saw the Aussie dollar jump while gold also rose among the undollar assets. The

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Paedocoin exposed

Via Washington Post: U.S. and international law enforcement authorities have shut down one of the world’s largest child pornography websites following a raid and the arrest of Jong Woo Son, the underground site’s alleged South Korean-based administrator, federal officials said Wednesday. Federal prosecutors with the U.S. attorney’s office in Washington, D.C., and IRS and Homeland

2

Macro Morning

By Chris Becker  Wall Street pulled back slightly overnight with a mixed Europe also weighing on positive sentiment as retail data disappointed and UK CPI came in lower than expected. Lack of news on a looming Brexit deal kept the continental currencies elevated slightly, while the US retail sales print saw USD flop, spiking Aussie

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Macro Afternoon

A generally positive day across Asian risk markets excepting mainland China, following the good mood on Wall Street overnight. The Australian dollar continued to tank following yesterday’s release of the RBA minutes while the NZD was relatively stable despite an uptick in monthly CPI.  Yen strengthened slightly after a big breakout in USD strength overnight

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Macro Morning

By Chris Becker  The prospect of a potential Brexit deal and the partial US-China trade deal took stocks to a four week high despite the ongoing Turkish/Syria tensions. US Treasury yields jumped, pushing US stocks higher while commodity prices slipped as the USD was largely unchanged as Pound Sterling jumped to a near six month

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Australian dollar soars on wings of trade rumour

DXY sank last night as EUR and CNY ran: AUD took off versus DMs: And EMs: Gold sank: Oil jumped: Copper too: And big miners: Plus EM stocks: Junk was mixed: Bonds were poleaxed: Stocks climbed: Westpac has the event wrap: US Sep headline CPI was flat m/m, with ex-food and energy +0.1%m/m, missing estimates of +0.1%m/m and

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What would a US/China Plaza Accord do to the Australian dollar?

More trade scuttlebutt this afternoon, via Bloomie: The White House is looking at rolling out a previously agreed currency pact with China as part of an early harvest deal that could also see a tariff increase next week suspended, according to people familiar with the discussions. The currency accord — which the U.S. said had

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Australian dollar, markets sink as trade deal sours

So says SCMP: Deputy-level trade talks between the US and China aimed at laying the groundwork for high-level negotiations later this week failed to yield any progress on critical issues, according to two sources with knowledge of the meetings. During the discussions on Monday and Tuesday in Washington, the Chinese refused to talk about forced

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Australian dollar sags despite doving Fed

DXY was firm last night despite a rising EUR and CNY: The Australian dollar was weak versus DMs: And EMs: Gold rose: Oil hung on: Copper too: Big miners struggled: EM stocks did better: EM junk rolled: All bonds were sold: As stocks rebounded: Westpac has the event wrap: The FOMC minutes reflected a generally positive outlook

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Australian dollar lifts on Goldilocks US jobs

DXY was soft Friday night as EUR rallied: The Australian dollar lifted versus DMs: But lagged EMs: CFTC moved a little shorter: Gold firmed: Oil too: And metals: Big miners rallied: EM stocks too: And junk: Plus bonds: And stocks: Event wrap from Westpac: Event Wrap US non-farm payrolls were not as weak as markets had

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A retail bounce today?

Retail sales are out today and a range of indicators are suggesting less bad for August. From CBA: Retail Trade Preview – August 2019 ■ We estimate that the value of retail trade rose by 0.9% in August. ■ CBA’s Household Spending Intentions (HSI) measure, based on a sample of more than 2½ million households

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Australian dollar surges back with risk

DXY fell last night as EUR bounced. CNY is closed: The Australian dollar rebounded against DMs: Not so much against EMs: Gold firmed: Oil fell: Copper too: Big miners edged up: EM stocks too: Junk did better: Treasuries were golden: And bunds: Plus Aussie bonds: Stocks bounced: Westpac has the wrap: Event Wrap Following the

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ASX smashed

XJO is taking it right in the team this morning, down 2.3%, with a nice double top in place short term: And downright epic long: Bonds are bid: AUD too: Big Iron is falling off a very high perch: Big Gas is in severe danger as oil crumbles: Gold up: Big banks are nasty: Even

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Australian dollar universally bashed

DXY was down last night as EUR lifted. CNY was flat: The Australian dollar was universally bashed, including a brief post-GFC low against DXY: Gold rebounded: Oil sank: Metals too: And big miners: EM stocks are headed for a retest of the lows: Junk cracked: Treasuries were on fire: Bunds less so: Aussie bonds boomed:

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Finally, RBA pounds Australian dollar

The Australian dollar has so far gotten what was pretty clearly dovish message from the RBA statement. More cuts and/or QE are coming: Bonds are bid even if a bit slower on the uptake: Stocks like it too: Though not Big Iron which is down with more sell side downgrades. Those head and shoulders patterns