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.

10

Bonds, not stocks or houses, are pointing to Australia’s future

And it ain’t pretty. The Aussie bond market boom is back with more 2020 highs (yield lows): It has steepened a little since last year, but the curve is still inverted out to the five year indicating weak growth at best and high recession risk for years ahead: In turn, this has spreads falling versus

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Macro Morning

By Chris Becker  European markets fell overnight as Wall Street barely eked out a scratch session, while the bond market and USD went nowhere in a hesitant fashion across the risk complex. The Canadian Loonie fell smartly on the release of the soft CPI data while Pound Sterling lifted on a spike in UK business

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Macro Afternoon

Markets in Asia have rebounded having absorbed the Chinese virus fears with a sea of green across stocks and European/US futures looking bullish. Chinese stocks have moved higher in solid reversals, with the Shanghai Composite rising nearly 0.4% to close at 3063 points, while the Hang Seng Index arrested its very sharp fall from yesterday,

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Macro Morning

By Chris Becker  Risk markets are getting nervous about the Chinese virus outbreak which sent Wall Street lower overnight while gnashing of teeth in Davos at the World Economic Forum did nothing to persuade further selloffs. The latest German ZEW survey surprised on the upside, giving the Euro a temporary boost before reversing completely on

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Australian dollar swoons as China takes ill

DXY softened a touch last night: But that couldn’t save the Australian dollar which collapsed with coronavirus: Gold is still strong: Oil is weak when Libya troubles don’t matter: Metals fell: Big miners whiplashed lower: With EM stocks: Junk softened: As Treasuries were bid: Bunds less so: Aussie bonds boomed: Falling yields helped prevent a

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Australia is about to become coronavirus ground zero

There are two angles to examine as coronavirus spreads in China and South East Asia. The first is health related. The second is economic. Australia is about see a wave of new Chinese tourists and students just as coronavius slips the CCP noose. Some 350k Chinese toursists arrive through the January/February period, a large swath

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Macro Afternoon

Markets took a sudden dive on risk today here in Asia on the back of the Chinese virus news with Yen safe haven buying exarcebating the fear. Stock markets are all at bubble like highs so it won’t take much to push over the whole edifice. Gold gained on the fear trade while the Aussie

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Macro Morning

By Chris Becker  A public holiday on Wall Street was enough to take the wind out of the bubble blowers overnight with European markets putting in mild scratch session, while bond markets drifted around. The IMF lowered their growth forecasts in the recent release at Davos while oil prices came back after reaching a new

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Macro Afternoon

Asian stock markets are creeping ever higher, lifting by the megabullish sentiment on Wall Street from Friday night with more record highs and new yearly highs the order of the day. Chinese stocks have diverted in fortune again with the goosed Shanghai Composite lifting nearly 0.5% to almost start the week back above the 3100

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Macro Morning

By Chris Becker  Another record night on Wall Street as institutional memories of past bubbles are erased and everyone presses the buy button! Solid US economic data on Friday night, namely industrial production for December imbibed risk to improve the outlook for 2020, with the USD surging against Euro in response. Commodities rose slightly alongside

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Macro Afternoon

It’s all guns blazing, bulls let loose in China shops – well, except China – as Asian stock markets are buoyed by the overnight lift on Wall Street with record highs and new yearly highs the order of the day. Chinese stocks are still struggling to make gains despite the rest of the region with

4

Trump revs up tax cuts 2.0

Via Fox: White House officials are scrambling to produce an election year fiscal stimulus plan that is likely to include tax cuts to juice the economy and stock market ahead of the 2020 presidential contest, FOX Business has learned. The stimulus would be a way to have an alternate message to the proposals from nearly

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Macro Morning

By Chris Becker  Today in Asia, markets will be watching the Chinese Q4 GDP print and have a wave of bullishness behind them if it all goes to plan as Wall Street made yet another record high in the wake of solid retail sales data for December. The USD re-engaged its strength against the majors

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Australian dollar chokes on stocks rocket

DXYwas firm last night. CNY is flying, bizarrely, as China eases: The Australian dollar is going nowhere versus DMs: EMs were a little weaker: Gold is holding gains in the hope of a falling DXY. I’m not confident: Oil lifted: Metals are still not very interested in the great reflation: Miners have stalled: EM stocks

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Macro Afternoon

Most Asian stock markets remained where they started trading today as the response to the signing of the US/China trade deal was not as bullish as expected. Chinese stocks continue to struggle with a higher Yuan with the Shanghai Composite falling nearly 0.5% to remain well below the 3100 points level, closing at 3074 points,

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Macro Morning

By Chris Becker  Depsite the signing of the Phase 1 trade deal between China and the US, sentiment soured overnight with Wall Street just scraping in with scratch session with focus actually on the impending impeachment trial in the Senate. The USD unwound its earlier gains while Bitcoin continued its big meltup, almost approaching $9000

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Trade deal to sink Australian dollar to 65 cents

Via Bloomberg: The Aussie could slide more than 5% to 65 U.S. cents this year, according to QIC Ltd. and Capital Economics. If Beijing buys more American goods at the expense of Australian products as part of an accord, that’s another negative for a currency that’s under pressure from slowing economic growth and the prospect of further policy easing.

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Macro Afternoon

Most Asian stock markets slipped in trading today as the response to the cooler than expected US CPI print and a much higher Yuan, all in anticipation of the signing of the Phase 1 US/China trade deal takes risk off the table temporarily. Chinese stocks are now struggling to absorbing the Yuan rise with the

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Macro Morning

By Chris Becker  Risk markets are trying to make new record highs again but the slightly softer than expected CPI print in the US overnight shook up the complex, with mixed results on Wall Street and scratch sessions across the European continent. Currency markets were generally contained with the majors not moving much while Pound

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Macro Afternoon

Asian stock markets advanced outside of China as the PBOC substantially lowered the fix of the Yuan which saw it strengthen a lot in offshore trading, now down to 6.87 making a new monthly low. The three main Asian undollars – Aussie, Kiwi and Yen – all fell back against the USD as result. Chinese

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Macro Morning

By Chris Becker  Another bullish day to be expected here in Asia with another record high on Wall Street overnight pushing the risk complex along with tech stocks leading the way. The poor US jobs print from Friday seems to have been forgotten as focus shifts more to risk taking, but currency markets were relatively