The Australian dollar was stronger last night as the global stock surge carries on. The trigger is a distinct easing in the bond back-up as virus concerns, a still dovish Fed and flamed out oil combine to suppress inflation concerns. DXY was weak and EUR strong: Despite the rally, the Australian dollar is still stuck
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.
DXY took a hammering last night as US yields fell back from the recent charge higher. We saw all of the usual resulted with EM, commodities and Australian dollar up strongly. I see this as a counter-trend rally. To the charts! DXY vs EUR: The Australian dollar lifted away from the neckline of its perilous
Pre-Easter trading had a still strong US dollar as jobs growth accelerated dramatically. Nonetheless, the Australian dollar held at the bottom of its recent trading range around 76 cents. Then last night the US dollar swooned as oil was whacked. To the charts: The Australian dollar held the neckline of its head-and-shoulders top again: Oil
Asian share markets are moving higher going into the Easter break with the firmer lead from Wall Street and some better than expected economic prints helping risk sentiment. Bitcoin is again relatively strong but remains unchanged as it finds more resistance at the $59K level while gold is poised here to breakout higher on its
President Biden’s new big infrastructure plan didn’t shake up markets as expected with Wall Street absorbing the proposed tax increases while the USD finally gave up some ground against the major currencies after being super strong all week. Treasury yields fell back slightly again but still remain above the 1.7% level as commodity prices were
The Australian dollar was weak overnight despite a powerful relief rally for anything and everything that has been recently squashed by rising US yields and greenback. DXY eased as EUR rose: The Australian dollar could not catch a bid and still sits right on the neckline of its head-and-shoulders topping pattern: Gold did better and
Asian share markets are pulling back despite very solid manufacturing PMI prints in China and the end of fiscal year window dressing in Japan. Bitcoin is again relatively strong but remains unchanged and elevated above the $58K level as it tries to get back above its recent record high above $60K: The Shanghai Composite started
Sometimes correlation is not causation. Take this from Citi: USD strength Last week’s major themes in spot FX include:·USD strengthened broadly (0.9% in broad NEER terms; BBDXY up 0.7%; EURUSD down 0.9%) against major currencies as rising concerns around third Covid wave paused the reopening optimism and led to risk reduction across markets, although the
It was a case of repeated expectations overnight on share markets at least, with the mixed Asian lead not upsetting the continued rise in European markets while Wall Street stumbled yet again in the wake of new tax increases for Biden’s new big infrastructure plan. The USD made another high, pushing Euro and the Aussie
The Australian dollar was crushed by a runaway greenback steamroller last night as US economic data begins to bubble. DXY was rampant as EUR fell: The Australian dollar was crushed back to the neckline of its head-and-shoulders topping pattern. Though it has still not broken: Oil was hit and gold smashed: Metals were all flattened:
Asian share markets are again quite mixed with Japanese stocks this time not moving while local shares pull back inline with the Brisbane (and greater QLD?) lockdowns, while Chinese shares surge. Bitcoin remains relatively strong but unchanged above the $57K level while gold is really struggling here after collapsing overnight and is now threatening the
The Australian dollar is clinging grimly to the clifftop as last night the DXY rallied on and EUR fell: The Australian dollar has backed away from the neckline of its monstrous head-and-shoulders top: Yields kept piling higher: Stocks are going exactly as expected with Nasdaq still deflating while value trades hold up wider bourses. Expect
Asian share markets have started the trading week in mixed fashion with today’s session seeing most markets pulling back and only Japanese stocks advancing. Bitcoin gapped higher, continuing its Friday session bounce to almost punch through the $55K level but still remains in a weekly downtrend after rebuffing the $60K level: The Shanghai Composite is
Ain’t this the truth from Nordea: The past week has seen the S&P500 future, Nasdaq and Brent oil prices primarily ranging sideways amidst choppy price-action. Aside from higher yields worrying investors – which has been the case on and off for the past few months, investors now also have to think about the direction of
Friday night saw risk sentiment firm once again going into the end quarter/month as the hastened pace of the vaccine rollout in the US embiggened economic efforts as the Fed gave US banks the go ahead to increase dividends. This lead to another record high on Wall Street will seal the deal for Asian stocks
Friday night saw a weaker DXY which helped drive a pop in the Australian dollar and risk assets generally: Brent jumped out of its swoon. Gold is hanging on: Base metals all partied: Miners went along for the ride: EMs stocks too though they still dangerously caught in a downdraft: Junk is fine. No Fed
Risk sentiment came back overnight with both European and Wall Street bouncing back as volatility on bond markets pulled back slightly and the USD continued to lift on the back of strong initial jobless claims overnight. Concerns over the Suez canal supply blockage continue to rattle commodity markets, with oil dropping 4% and copper down
Capitulation by Australian dollar analysts that is. Last night the US dollar poured on the heat as it powered higher on its emerging growth, inflation and yield exceptionalism: The Australian dollar is sitting right on the partially broken neckline of its monstrous head-and-shoulders top: The newsflow was roughly unchanged with Europe falling back into the
Asian share markets are extremely mixed in today’s session with Japanese stocks rebounding while Chinese shares remain nearly unchanged in response to last night’s selloff in tech stocks on Wall Street. Bitcoin continues to really struggle with another selloff going into the European session with the four hourly chart broadcasting more downside to follow as
The news today for the world’s greatest ever ponzi-scheme is not good. Elon Musk has declared that you can now buy a Tesla with BTC, continuing his recent narrative that BTC is for transacting not substituting for gold: You can now buy a Tesla with Bitcoin — Elon Musk (@elonmusk) March 24, 2021 Why is
Tech stocks fell sharply again on Wall Street as volatility around currency and bond markets was abated somewhat, despite the release of solid flash PMIs and a poor durable goods order print blamed mainly on the weather. The USD firmed again, while oil prices jumped on the Suez canal supply blockage, in what looks like
The Australian dollar is breaking the neckline of its immense head and shoulders topping pattern as we speak: Credit Suisse captures the moment rather well: We shift to a more neutral stance in AUD and NZD: we now see AUDUSD trading in a range between 0.7415 and 0.7800 and expect NZDUSD to trade between 0.6870and
Asian share markets continue to fall across the region, save locally with the poor lead from Wall Street and rising concerns over COVID in Europe with Chinese shares leading the way again. Bitcoin continues to really struggle here with another weak session going into the European session with the four hourly chart broadcasting more downside
More lockdowns across Europe and less risk taking saw Wall Street fall overnight with tech stocks leading the way again as the USD firmed against everything with Pound Sterling and Euro making new weekly lows although Yen remained firm. Treasury yields fell back well below the 1.70% level in response to very poor US home
For many years, far more than I would ever have thought possible when the MB journey began, we have campaigned for a simple change in philosophy among Australian policymakers. It was that we should shift away from house prices as the key macro determinant and move back to an older wisdom that promoted economic competitiveness
Asian share markets have ignored the good lead from Wall Street overnight and have continued their very mixed start to the trading week with Chinese equities selling off fast in the wake of the US/Allied sanctions, while Japanese and local markets tread water. Bitcoin is really struggling here going into the European session with another
The USD retreated overnight slightly, helping risk currencies like the Australian dollar as the bond market settled with 10 year Treasury yields pulling back to the 1.70% level. Wall Street was more unified with tech stocks pushing the whole edifice higher, starting the week on a BTFD fill, while Euro stocks diverged in response to