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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Australian dollar crash

The FOMC released the decision from its two day meeting early this morning and, as widely anticipated, they announced that they were going to extend the duration of their Treasury holdings in order to try to get the entire interest rate curve lower. They said: …decided today to extend the average maturity of its holdings

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Australia needs a Tobin tax

But I see offhand no other way to prevent financial transactions disguised as trade – James Tobin In 1972, after the collapse of the Bretton Woods system (where currencies were pegged to the USD, which itself was backed by gold), economist James Tobin proposed a tax on the currency exchange. As he says: The tax

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Australian dollar caught in euro downdraft

Italy was downgraded by S&P this morning and it has served to underpin the poor price action in European equities overnight, knocked the Dow and S&P futures out of their slumber and whacked the AUD and EUR which look headed a couple of cents lower. I’ve been trying to post for a couple of hours

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Australian dollar weekly wrap

Welcome to this week’s edition of the Australian Dollar weekly wrap and outlook. We’ve moved it to Monday to better sync with trade. The AUD traded down to a low around 1.0180 last week as concerns grew that Europe was going to be unable to get itself sorted and avoid a Greek bailout. The positive

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Australian dollar weekly wrap

Hi Everyone…first wrap up for a few weeks after my break and after last nights moves looked very much like risk positions were pared with pretty much everything falling. As I write: the Dow is down 2.69%, S&P 500 similar amounts, European bourses fell between 3-4% the EUR is off 1.67% AUD and NZD are down 1.05% Crude fell

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Currency cold war

Unusual times call for unusual measures and the move by the Swiss National Bank (SNB) to fix the rate of the Swiss Franc against the Euro this week certainly qualifies. From a Swiss point of view I applaud it wholeheartedly but from a global markets point of view I worry that this move will have

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GDP rebounds

The ABS released their National Accounts aggregates today, with a broad surge in GDP growth since the dismal natural disaster-affected first quarter.  The key figures are below. Also important is the revision to the March quarter – up from -1.1% to -0.9%, leaving GDP up 1.38% over the year to June, and per capita GDP

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Australian dollar calm returning?

Last week was a tumultuous week for the AUD trading down to important support at 0.9929 where it held in very well before bouncing to sit this morning at 1.0370 as I write. You can see in the chart above the volatility of the AUD and some selected risk markets on a hourly basis, indexed to 100,

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Data Vault

Australian Data The Australian data calendar was dominated by employment and confidence figures this week and unfortunately neither provided any evidence of an improving outlook for the domestic economy with leading indicators actually suggesting we are in for weaker outcomes over the reminder of 2011. Housing finance was also subdued with investors becoming increasingly disenchanted

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Australian dollar bull trap

There is no denying that the AUD, when it wants to, is a volatile beast, when the buyers clear out it simply crashes. Yesterday was a case in point and while the AUD was clearly crashing with other risk assets there was definately a buyers strike after whoever was defending 1.00 (potentially the RBA) stepped

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Is it a bird? Is it a plane? No, it’s Rogoff

What a day today for markets. Everything was under pressure early and then Ken Rogoff turns up on Bloomberg talking about QE3 and off we go. This could be true or a complete furphy as it is just coincidence that the Fed is due to make an announcement on monetary policy at 2.15pm New York time

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Australian dollar crash

The AUD has fallen 2.45% in the first 26 hours of this trading week and currently sits at 1.0170 as I write. Last week I said that I thought the AUD would fall to 0.9700 within two months and I continue to hold that view even though it might happen much sooner than expected. But how does the

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Currency reservations

In February 2009 after I came back from holidays in Yamba I sat down with a mentor and mapped out how we thought the crisis would manifest over the coming years. I had a massive advantage over many investors and traders in that in my research I had stumbled upon a book written in 1996 by

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Australian Dollar Weekly Wrap

A big week for the AUD as risk finally went off and the AUD tumbled 600 points from the high of the week to finish at 1.0442 in New York this morning. Anyone who talks of safe haven buying now should have to pay these 600 points to charity. On a million dollar AUD position

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Australian dollar downside targets

The AUD traded a 1.0390 to 1.0790 range for a couple of months before breaking out recently and trading all the way up to 1.1080. The ructions in markets have it threatening the bottom of this range as I write, with the AUD at 1.0442 as Europe has walked in and started selling in earnest

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Australian dollar is no safe haven

The AUD has been smashed in the past 36 hours as markets have gone off and fear and uncertainty has risen. From trading 1.1068 earlier in the week it sits at 1.0468 as I write. In many ways it is a resumption of usual transmission for the currency that I believe is the world’s favourite punt. This

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Australian Dollar Weekly Wrap

This week we saw the AUD break higher but not quite go on with it. I got stopped out of my long from the break of 1.0790 with a nice profit but I’m also long from the break of 1.1012 and a bit nervous on that one. And the USD continues to tank as the world

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Australian dollar upside targets

The Aussie has broken the major resistance level and this year’s high at 1.1013 today in the wake then the higher than expected CPI. While it hasn’t really gone on with it yet this break, if sustained, is important in the overall context of where the Aussie might be headed. Look at the long term

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The bullet proof Australian dollar

We have talked often in this space about the idea that the Australian dollar has undergone a rerating over the past year or so and that, as such, will, indeed has, held up better than could have been expected recently given all the turmoil. On Saturday in the Weekly Wrap, I discussed the big positive

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Access goes all in on rate rises

Boy, do we have a market in interest rates. From Bloomberg: Australia’s central bank will increase interest rates three times in the coming year as a mining boom boosts wages and helps the economy recover from natural disasters, a Deloitte Access Economics report showed. High resource prices and strong demand will boost Australian incomes and there

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Australian Dollar Weekly Wrap

Interesting week for the Aussie – finally breaking out through the top of the last couple of month’s range on the back of hopes for a European resolution as we discussed in yesterday’s piece. The outlook could be turning quite positive for the Aussie if we end up with a benign market environement like the

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Australian dollar breakout

After trading the inside range for a while now the Aussie has finally broken topside overnight on the back of the Euro “solution” and along with the ebullience in other markets is threatening to move up and test resistance at 1.1013. As you can see in this chart the Aussie does not have a life

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Australian dollar: Give us a minute!

Today sees the release of the RBA minutes from this month’s Board meeting and there is a really strong chance that shortly after their release at 11.30 (EDIT previously I wrote 2.30pm) rates are a little higher than where they are this morning. Yesterday I was talking to an old colleague about the rally in interest

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Australian Dollar Weekly Wrap

Another week of the Aussie dancing on the spot as it traded inside the range once again. Excuses abound for Aussie selling but it continues to hold in relatively well all things considered. We had a good chat in the comments section after yesterday’s piece on the tussles between the bulls and bears in the Aussie.

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Australian dollar bulls and bears

A couple of competing stories in the press this morning highlight one of the reasons that the AUD/USD rate has been stuck in a range for some time now. In The Australian this morning we have the headline “China risk jangles nerves on high dollar” while over at the SMH we have “As might dragon

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Australian Dollar Weekly Wrap

Gee whiz if your not a short term trader the Aussie would be driving you nuts at the moment, range bound as it is but without the strength to challenge the important levels up at 1.1013. From my point of view it remains my feeling that we have to test up there again eventually. During

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Aussie Dollar at risk from the RBA

I haven’t posted much trading style stuff recently as the Aussie has been trading a range and I’ve been away from the desk often on business but for those with a trading bent today offers a potential opportunity. As you can see from the chart above last weeks move from just below 1.04 (range bottom)

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Australian Dollar Weekly Wrap

I’ve been absent from the currency space in a tumultuous week, as I was out of the office on Business,  where the Aussie tried to break the bottom of the range only to flip the shorts and rally aggressively back to 1.0783 as I write. What can we garner from the run up to and post

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Australian Dollar Weekly Wrap

I’ve been out of the office for the back end of the week so my observations are more ex-poste than normal. Sometimes that’s a good thing because we can always write history perfectly but at other times you miss the nuances that you gain when you are sitting in the midst of what’s going on. But I

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When the Australian dollar strikes midnight

We haven’t seen a real risk off event yet as most people seem still to be trading as if there is going to be a resolution to the Greek crisis and also, I think, because all the recent volatility has pushed people to the sidelines. So the Aussie has actually been performing superbly all things