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

While there was no change to the Bank of Japan’s interest rates at today’s meetings, the USD has surged across the board as US Treasury yields climb sharply on the return of US traders to their desks as the long weekend finishes. This has seen Asian stock markets put in mixed sessions despite lower domestic

4

Crypotland strikes back!

FTAlphaville with the update: Oh dear oh dear oh dear. Just when you thought you might have got away with ripping some images from the internet to make a cartoon about a fake crypto paradise island that some people seem to believe might actually one day exist and flogging some NFTs on the back of it

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Macro Morning

Stock markets were relatively buoyant overnight due to the holiday on Wall Street plus the lack of economic releases, although the calendar plays catchup today with the latest BOJ interest rate meeting leading the charge here regionally. With US bond markets closed, there was no impetus there for change with the 10 year yield likely

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Australian dollar weakens as Fed warms up

DXY was up again last night: Australian dollar was mixed: Oil is still hot: Dirt mixed: Miners soft: EM stocks softer: EM debt softest: US markets were closed for Martin Luther King Day. Westpac has the wrap: Event Wrap Italian CPI inflation in December was finalised unchanged from the preliminary at 4.2%y/y). Canadian manufacturing sales rose 2.6%m/m

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Macro Afternoon

Asian stock markets are starting the trading week generally upbeat despite a poor finish by stocks on Wall Street, with a cut in Chinese rate cuts helping buoy markets. Also, the stronger USD helped take the heat of some domestic currencies including the Australian dollar although gold is holding on to its poor Friday finish,

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Macro Morning

A slew of disappointing economic prints saw Wall Street finish in mixed fashion again on Friday night with the USD finally reversing course. US retail sales and industrial production prints fell back which saw the bond market sell off as 10 year yields almost hit the 1.8% level again. Gold fell back alongside other risk

129

Macro Afternoon

Asian stock markets are finishing the trading week in poor spirits following the selloff in tech stocks overnight on Wall Street, with all markets losing 1% or more. The USD remains under pressure against everything with Bitcoin rolling over through the $43K level while gold has held on to and advanced from its previous breakout,

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Macro Morning

Wall Street hiccuped overnight following the big bang inflation print with tech stocks dragging the whole edifice down, with the NASDAQ losing 2.5% on the back of multiple Fed officials mentioning that sharp interest rate hikes are coming sooner than expected. The initial jobless claims print came in higher than expected, while the bond market

110

Macro Afternoon

Quite a mixed session for Asian stock markets following the epic inflation print overnight in the US that is sure to stir risk markets everywhere as appreciating domestic currencies put a dampener on stock markets. The USD remains under pressure against everything although Bitcoin is still stalled at just over the $43K level but gold

2

Macro Morning

The big bang shocked risk markets overnight with one of the biggest inflation prints in decades in the US sending the USD down – yes, down – against almost everything – with stocks tentatively moving higher. The Fed has a lot of catch-up to do although the bond market was benign in the wake of

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Macro Afternoon

The bounce is in and risk taking is going great on Asian stock markets after a very mixed start to the trading week with all bourses reporting in the green with solid sessions. The USD continues to be under pressure following the Fed Chair’s testimony overnight but this could come under jeopardy if tonight’s core

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Australian dollar firms with BTFD

DXY was weak last night and looks like it might break down: The Australian dollar popped with BTFD: Oil is raging higher: Base metals were strong: And big miners: EM stocks popped: But EM junk is still warning about growth ahead: So is the US curve as it suddenly flattened: Helping lift Growth: Westpac has

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Macro Morning

The buy the dip crowd stepped in on Wall Street overnight following the previous session late bounceback as testimony from Fed Chair Powell on balance sheet adjustments saw USD weakness across the board that should result in higher risk taking here in Asia. The bond market firmed a little although the recent shorter term Treasury

24

De plane! De plane, boss! Welcome to Cryptoland

FTAlphaville with the note: Just when bitcoin and crypto and NFTs were finally being taken seriously with imminent mAsS aDopTiOn an inevitability as we headed for blockchain-based utopia, someone goes and puts something like this on the internet: Talk about a party pooper. Yes that’s an 18 minute 35 second presentation of “the world’s first

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When will the yuan break?

In my view, CNY will fall in 2022. Property sales have not recovered at all seasonally adjusted and land sales remain a disaster. Only rate cuts can fix it and the longer PBoC waits the more that will be needed. Mizuho with the note. In view of ongoing delayed payments or defaults by Chinese property

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Macro Morning

Wall Street was down over 2% overnight before a late bounceback saw it pare those losses as volatility across risk markets increases as the new year rolls on. The release of the latest US unemployment print last week continues to reverberate with 10 year Treasuries again up near the 1.8% level for new yearly highs

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Macro Afternoon

Asian stock markets are having very mixed starts to the trading week with local and Japanese shares going nowhere in the wake of a wobbly night on Wall Street following the US unemployment print on Friday night. Despite some initial USD weakness, not all risk currencies are bouncing back with the Australian dollar still under

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Macro Morning

Not a good start for the trading year for Wall Street with the release of the latest US unemployment print which was all over the place – not even 200K jobs created, far short of the 400K expected – but the actual rate fell and wage growth increased. This sent the bond market in a

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Australian dollar forecast 2022

The US dollar was weak on Friday night as EUR bounced: But Australian dollar was weak anyway: Oil is firming as OMICRON hints at the end of COVID19: Base metals were firm over Xmas but not copper: Big miners are getting very excited for no reason: As EM stocks go the other way: Trailing EM

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Macro Afternoon

Asian stock markets are having very mixed finishes to the trading week with a lot of internal and external macro pressures weighing on risk taking across the region as markets react to the very hawkish shift at the Federal Reserve. The USD remains the safe haven of choice with gold and the Australian dollar under

5

Australian dollar crushed by Pound Sterling

The Australian dollar was one of the biggest casualties overnight as the USD rose, despite solid moves on commodity markets, as the interest rate dynamic continues to outweigh the other factors. This keeps the Pacific Peso on a downward trajectory for 2022 so far, breaking the very nascent uptrend from the Xmas breakout period as

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Macro Morning

Following the release of the Fed minutes in the previous session, indicating a much more hawkish bent as markets get ready for tonights US unemployment print, it was a case of wait and see on Wall Street overnight, although the bond market continued to weaken as interest rates rises firm throughout the calendar year ahead.

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Macro Afternoon

Asian stock markets are pulling back very sharply across the region in response to Fed minutes released last night which saw tech stocks and Wall Street in general press the sell button on almost everything. The USD remains the safe haven of choice with gold and the Australian dollar under a lot pressure alongside other

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Macro Morning

The New Year party was spoiled by the release of the Fed minutes overnight, indicating a much more hawkish bent as we head into the taper and “normalisation” of interest rates in 2022. This caused tech stocks to fall sharply, dragging down industrials on Wall Street and pushing 10 year Treasury yields higher to almost

126

Macro Afternoon

Asian stock markets are retracing across the region in response to the sharp falls on tech stocks overnight on Wall Street but it appears to be mean reversion more than an outright selloff at this stage. The Australian dollar remains under pressure alongside other risk currencies however, with Bitcoin still struggling at the $46K level