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.
Not a great night if you are bullish on stocks and the commodity complex, because commodity currencies like the AUD which were already off a tad on the back of the flash Chinese PMI after lunch yesterday, and then were put under more pressure from similar indexes in Europe. On the markets Bloomberg reported: March
Trading Day covers the relevant moves in the Asian stock, commodity, debt and currency markets including a review of the top 8 Australian stocks – the top 4 miners and banks, highlighting trading ideas and investment opportunities. Remember to read “Trading Week“, published each Saturday morning, to put these events and ideas in context. Well
Nothing like a juicy China story, well actually a bad one, to get the Australian dollar moving. From the NAB’s morning note: Equity markets were weaker overnight after mixed US housing data and also concerns about the strength of the Chinese economy. Both BHP and Rio Tinto warned that Chinese demand for iron ore is
It is undeniable that the Australian dollar has had a great bounce off the support we highlighted last week. While I thought the Australian dollar might have fallen into the 1.0378/1.0407 zone, it got close enough that over the past few days people are becoming bullish once again. Lets first look at last weeks chart and then
The Aussie is doing as I’d expected at present and continuing to struggle, hitting what I think is a 2 month low overnight at 1.0427 against the USD. The wash off the oversold hourly move a couple of days ago pulled up exactly where it should have just below 1.0560/75 and last night saw it under
It’s time to get on my high horse again about the Australian economy and what is not being done by policy makers and the RBA. I live in the Hunter, having worked until recently as the Treasurer of the dominant Financial Institution in the region, in addition to spending countless hours, days and weeks getting
Let me ask you a question. Do you care if the Aussie Dollar heads toward 1.20 or 1.25 in the next 12 to 18 months, as Australia’s alternative Treasurer Joe Hockey said the other day? In the Sydney Morning Herald Mr Hockey was quoted as saying: ‘…it is not inconceivable for the Australian dollar to reach
The Australian dollar fell out of bed last night as equities fell, emerging market sentiment waned and so called risk assets generally just turned to “off”. It sits this morning at around 1.0530 having made a low at 1.0524 earlier this morning. Where to now? On the hourly chart it looks a little over sold:
The risk rally is faltering at the moment and the Australian dollar is feeling the heat. Last week my mate Omid said in his short piece that 1.0665 was the key support. Similarly Rick Spooner over at CMC Markets had this level as the one to watch on the long he suggested. So there is
Back in 1986 when I did my HSC the teachers told us that we had to read the Sydney Morning Herald in a crucial window during the year because whatever Ross Gittins was writing about was likely to form, or frame, the questions in the Economics exam we were going to sit later in the year. So
I have a few rules when it comes to trading and one of them is “be wary of Monday morning Asian moves” this is especially so if it is accompanied by a US holiday. So it’s no surprise that on Wednesday morning the Australian open looks very different to yesterday when the US had not
I read on Flipboard over night that US Hedge fund manager John Paulson is getting long gold and telling others to get on board as well because of the inflation that is coming down the road from government policies being run at the moment. With all due respect this sounds like “book talking”. The history
The Australian Dollar is higher than it has been in decades. Indeed, it is more than 30 cents higher than the average since it was floated in December 1983. Yet while we see businesses constantly in the news contemplating or actualising job losses and off shoring, the arms of government and policy makers here in
I heard the other day that Australian corporates have been buying a little Aussie lately which struck me as odd given how high it is. But equally, it suggested that a fear of further rises is permeating corporate Australia, as I have written a few times in the past couple of weeks. So, given the
Here’s a question for you. What does a US job market recovery, low rates from the Fed, ECB, BOE and a rally in risk assets equal for Australia? TROUBLE! Trouble for Australian manufacturing, trouble for Australian tourism operators, trouble for Australian universities and the outward facing education sector in general, trouble for Australian retailers, trouble
The Cupboard today speculates that the Australian dollar is ready to fly to $1.20. Here is the Citi note that says so. I don’t doubt that this is a possibility with risk on growth and QE3 looming. So far as I can tell, with job losses already accelerating, this would seriously threaten any notion an
Yesterday Alan Kohler wrote that the Aussie is being bouyed by people using the euro as a funding currency. Last night Nouriel Roubini wrote a piece that said notions of the euro as a funding currency are bunkum. I tend to agree more with Professor Roubini than Mr Kohler but as I wrote back on
As we all know, the euro has been under pressure again lately, as well it might, given moribund politicians and problems with Club Med (PIIGS as we call them now). But for me, one of the main themes this year may divergence between markets and economics. That is is possible is no surpsie for those of us
Overnight I tweeted that the Australian dollar was breaking its downtrend from the highs of last year around 1.1075/80, but it was unable to hold above the crucial 1.0420/30 region and fell back this morning to around 1.0370/80: This zone holds both the downtrend resistance from the high last year but also the 61.8% retracement of the
Thin slicing is both a reality and a biological necessity. Whether it’s Malcolm Gladwell in “Blink” or Daniel Kahneman’s System 1 in his latest brilliant book, “Thinking Fast and Slow” the reality is that there is a part of our brain that, in Kahneman’s words operates automatically and quickly, with little or no effort and no sense of voluntary control. Certainly when it comes
The Australian Dollar Euro exchange rate has been making new highs this week so its time to talk about whats going on. Last week I posed the question of whether Australia was the new Switzerland. It was a question that I didn’t mean literally but metaphorically. That is, is Australia now the place people see as
We haven’t seen John Talyer for a few months or so, since he forecast Western recessions and a rocketing $US. Clearly I agree with those calls and they look more and more prescient now. Today he has some very interesting things to say about currencies:
The Australian dollar is under intense pressure from an unfriendly world which looks to be building into a perfect storm for the world’s bellwether growth currency. It has sold down through the support I talked about earlier in the week and remains biased lower. As you can see in the chart below, it is at a critical
What’s your view on equities, the S&P 500 or the bourses of Europe? The reason I ask you this question is because if you can riddle me that then you know where the Australian dollar is going to head in the next week or so. As the Prince showed earlier today in C0TD, whether its
We never want to get too bearish just for the sake of it but the Australian Dollars break down through my target from earlier in the week of 1.0322 yesterday and then this morning’s take out of 1.0230 suggests to me we are on the verge of a cascade that may see us all the way
In what has to pass as good news for Australian manufacturing these days, its ongoing recession slowed in October, according to today’s PMI: The decline in manufacturing activity continued in October, albeit at a slower pace. The seasonally adjusted Australian Industry Group-PwC rose 5.1 points to 47.4. (Readings below 50 indicate a contraction in activity