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

The selloff has abated somewhat here in Asia with only local markets falling on the back of both iron ore and coal concerns, as the USD remains firm against the risk currencies with gold still flummoxed at well below the $1800USD level: The Shanghai Composite is down 0.6% so far to remain below the 3600

5

Macro Morning

Wall Street volatility spiked significantly overnight in the wake of the latest strong retail sales data with the USD firming strongly against many of the risk currencies as a result, particularly the Aussie dollar which continues to fall in line with iron ore. Bond yields lifted across the curve while other commodities inched higher, although

7

Australian dollar crushed with iron ore

DXY is up and away on the growing energy crisis with US oil and LNG set to benefit. EUR was squashed: The Australian dollar was flushed with commodities: Oil was up and gold down: Base metals are a raging bubble fit to burst. 10% of global copper goes into Chinese property. Almost all nickel into

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Macro Afternoon

The selloff continues here in Asia as the fallout from the Evergrande collapse spreads throughout the region, with only local stocks rebounding on the latest unemployment figures. The USD is firming once more against the risk currencies with gold still holding below the $1800USD level, while Bitcoin has picked up again, pushing through the $48K

3

Macro Morning

It’s risk back on as the latest US industrial production print slightly missed expectations, but this was enough of a catalyst to get things moving again after nearly two weeks of uncertainty on Wall Street. Bond yields rose slightly while the USD fell back mainly against Yen as the other risk currencies still remain in

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“Stay away from the Australian dollar”

My charts are still down today. DXY and AUD were basically stable. Oil took off and Treasuries were hit. Stocks loved it all. Here’s Credit Suisse with an outlook that I agree with: Last week’s ECB meeting saw the market’s core expectation–a PEPP “taper” accompanied by a commitment to longer-term asset purchases / dovishness–easily met,

74

Macro Afternoon

The selloff continues here in Asia as the fallout from the Evergrande collapse spreads throughout the region, with even Japanese stocks taking a tumble. The USD is firming once more against the risk currencies although gold is just holding above the $1800USD level, while Bitcoin has peaked again at just below the $47K level as

1

Macro Morning

It’s risk off as the latest CPI print in the US underwhelmed Wall Street, sending US stocks to a new one month low. Bond yields fell back sharply in response with the 10 year Treasury back to 1.26% while gold and other major currency pairs roundtripped around the print, with the shiny metal able to

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Australian dollar bashed by China

My charts are still skewiff so forgive the brevity. DXY was firm overnight and EUR fell: The Australian dollar was bashed: Gold and oil were strong, copper weak: Treasury yields fell hard and Value stocks followed them lower. Westpac has the wrap: Event Wrap US CPI inflation in August was slightly weaker than expected, +0.3%m/m and

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Macro Afternoon

Risk taking in Asia is definitely limited to Japanese markets with Chinese bourses selling off and Australian shares unable to put in a new high as RBA Governor Lowe’s speech remaining dovish for the Aussie dollar. Gold is still struggling to get back above the $1800USD level, while Bitcoin is flat lining as well as

7

Macro Morning

Wall Street was looking to put in a sixth consecutive down session last night, but managed a very late comeback as concerns about growth and vaccination mandates amid rising delta outbreaks lingered. Bond yields fell back slightly with the lack of any relevant events on the economic calendar providing little catalysts to move bond or

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Macro Afternoon

A somewhat solid start to risk taking here in Asia as we start another trading week with stock markets not reacting to the falls on Wall Street on Friday night, while the USD remains relatively strong against risk currencies despite some lifts in commodities. Gold is struggling to get back above the $1800USD level, while

0

Macro Morning

Wall Street fell for the fifth consecutive session on Friday night, with a significant fall in industrial stocks due to concerns about growth post the US vaccination mandates. Bond yields rose however with the USD lifting slightly higher as European stocks also put in mixed finishes for the trading week as the latest industrial production

139

Macro Afternoon

A much better finish to the trading week here in Asia with stock markets rebounding following yesterday’s selloff. Risk currencies were basically unchanged, although Yen sold off against USD as risk appetites broadened throughout the session. Gold is back up above the $1800USD level but only just, while Bitcoin is again largely unchanged by hovering

0

Macro Morning

Wall Street fell for the fourth consecutive session, taking US bond yields and the USD with them with the latest ECB meeting proving no real change in stimulus direction while US initial weekly jobless claims came in as expected. Risk sentiment also remains mixed amongst commodity markets with oil dropping more than 2%, while copper

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Macro Afternoon

Stock markets continued to have divergent fortunes across Asia with only mainland Chinese shares advancing, despite a massive drop in Evergrande shares and bonds while Japanese political machinations continue to unravel. Risk currencies were basically unchanged, as was Bitcoin as it remained just above the $46K level while gold is really struggling here after breaking

0

Macro Morning

Sentiment continued to sour on risk markets overnight amid concerns that stimulus pullback is still coming sooner rather than later, despite a disappointing Biege Book reading from the Fed overnight. Wall Street continued with another mild selloff, while European shares dropped sharply across the continent as the USD continued to firm against the major undollar

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Macro Afternoon

Stock markets had divergent fortunes across Asia as the wobbles on Wall Street extended to the region today, although Japanese stocks continued their epic surge.  Risk currencies continue to pull back with the Aussie dollar still well under the 74 cent level vs USD while gold is struggling to get back above the $1800USD per

3

Macro Morning

Sentiment is reversing on risk markets amid concerns that slower growth is ahead as the latest German ZEW Survey indicated future economic expectations are flagging across the continent. The return of US traders did not help quell those concerns with Wall Street putting in a poor start to their shorter trading week, while the USD

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Macro Afternoon

Stocks continue to surge across Asia – except locally – with the lower USD and flat US stock futures still not hindering safe haven buying either. Risk currencies continue to pull back slightly with today’s RBA meeting and non-decisions keeping the Aussie dollar under control, while gold has slipped back to the $1817USD per ounce

0

Macro Morning

The lack of US traders overnight due to Labor Day holiday saw currency markets go into a holding pattern while European stocks put in multi year highs, with German factory orders much firmer than expected. The rolling pace of vaccinations combined with more solid economic news is buoying risk taking on the continent, with Brexit

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Macro Afternoon

Stocks have surged across Asia despite the somewhat surprising undershoot in Friday night’s US unemployment print, with a lower USD and flat US stock futures not hindering action either. Risk currencies have pulled back slightly from their recent booming ascent, including gold which surged up towards the $1830USD per ounce level, but all the action

0

Macro Morning

The latest US jobs report came and went on Friday night, setting the risk tone for the rest of the month as usual and surprised to the downside – maybe a little too much with another fall in the US ISM Manufacturing survey as well. The USD fell back only slightly while the Australian dollar

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Australian dollar short squeezes higher

Forex markets sustained their counter-trend actions Friday night, and how. DXY fell like a stone while EUR and AUD are roaring: It’s a pretty wild rally suggesting a short squeeze yet CFTC data got even longer: Commodities all rose: Miners less: EMs stocks too: EM junk was soft: The US curve steepened: And Growth led

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Macro Afternoon

Japanese stocks are leading the way in the region with the stepping down of the Prime Minister, while traders overall are positioning for tonight’s all important US employment print. Risk currencies have slowed down their ascent, including gold which continues to hover above the $1800USD per ounce level, as Bitcoin tries to stabilise here after

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US dollar smiles until Fed punched in the face

TS Lombard with the note: Powell reiterates AIT policy.In the end, the Jackson Hole policy retreat did not herald the announcement of a major policy shift (we never thought it would, but some investors were betting on a hawkish surprise.) Markets interpreted Fed Chair Powell’s speech as dovish, buying equities and selling USD. Indeed, Powell

3

Macro Morning

The USD fell back again overnight as the weekly initial jobless numbers were slightly lower than expected, setting up for a dovish NFP print tonight that will set the risk taking for the month ahead. Notably, US GDP estimates have been pulled back which will add to the “don’t taper too soon please” dogma on