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.
The expected retracement in wildly overbought stocks following the Pfizer vaccine surge continued overnight on both sides of the Atlantic. Defensive currencies like Yen and Swiss France are up while volatility in Kiwi continued following the RBNZ meeting. The flat US CPI print still gave the USD some strength, with the Aussie finally falling back
DXY was flat last night as EUR lifted: The Australian dollar was bashed anyway: Gold firmed but looks vulnerable: Oil fell: And metals: Plus miners: EM stocks were hit: Junk too: As the Treasury back-up reversed: Stocks fell too: Westpac has the wrap: Event Wrap US CPI inflation was flat in October (vs +0.1% expected), for
Vaccine volatility continues to pullback extremely overbought markets across the region – save Japan – with the USD gaining strength against most of the majors going into tonight’s inflation report. Gold is still under enormous pressure here after its big retracement, up slightly after revisiting its extreme lows at the $1869USD per ounce level:
Stock markets were moderately positive overnight although a return to strength for USD dampened some risk expectations, alongside the massive surge in COVID cases in the US and Europe. Dovish comments from ECB members sent Euro down while the Australian dollar slipped slightly as commodities were mixed, gold particular which returned to its post vaccine
DXY firmed last night: The Australian dollar fell: Gold looks precarious: Oil is trying amid a vast glut: Metals did OK: Miners are back from the dead: EM stocks firmed: Junk was strong: Treasuries were bid though it does not show on the chart: Stocks too: Westpac has the wrap: Event Wrap Ahead of the
Vaccine volatility has abated in mixed fashion across the region with Chinese shares unsettled, with not much action on currency markets except Kiwi which jumped on the RBNZ meeting. Gold is still plodding on after its big retracement, currently up slightly to the $1881USD per ounce level, still way off its prebreakdown high: The Shanghai
DXY is stalled perhaps in part by the European virus which hardly makes a EUR bid exciting: The Australian dollar likewise Gold bounced: Oil took off. There’s a glut but the market wants more: Metals were firm: Miners have reversed spectacularly: EMs fell: Junk is fine: As US yields back-up some more: Which did not
The Pfizer vaccine surge is consolidating after two nights of modest reaction from Wall Street, as tech stocks continue to selloff in the wake of the US election. The closely watched German ZEW survey last night weakened with more news of a slowing recovery across the continent still unable to dampen European stocks which led
Vaccine volatility has provided various opportunities across risk markets here in Asia following the Pfizer announcement overnight that saw European markets surge 5% or more. Share markets are all up but not at the same levels as Wall Street had a more realistic tone, while undollar assets have given up a lot of their overnight
Goldman: PFE and partner BNTX reported positive top line Ph3 data for its COVID-19 vaccine, BNT162b2. The trial met the primary endpoint (preventing COVID-19 in those without evidence of prior SARS-COv2 infection) and per the release the case split between vaccinated individuals and those who received the placebo indicates a vaccine efficacy rate above 90%,
DXY rebounded last night: Australian dollar pumped and dumped vs US and went parabolic elsewhere: EM to the moon: Brent ecstasy! Gold OMG! Metals firmed: Miners to the moon! EM stocks to the moon! Junk to the moon! Yields to the moon! Stocks to the moon! Westpac has the wrap: Event Wrap A vaccine developed by Pfizer and BioNTech
Its a day of excitement across risk markets here in Asia following the pause on equity markets on Friday night, absorbing the Biden election victory and the better than expected US jobs figures over the weekend. Gold is surging again after consolidating at the $1950USD per ounce level post last week’s FOMC meeting with a
Via UBS: AUD & NZD: Upside risks to front-end NZD rates; RBA QE + CLF = lower AU 10y The RBNZ hasn’t been providing a forecast path for the OCR for the quarters after March-21; but we expect this to change at the 11 November MPS (see here for our preview). If the RBNZ refrains
Stock markets stalled throughout the risk complex on Friday as the US election finally came to somewhat of a conclusion with Trump losing, while the better than expected and highly anticipated non-farm payrolls (aka US unemployment print) wasn’t able to push equities higher. Bond yields rose again while the USD continued its retreat alongside commodity
DXY sank again Friday night: The Australian dollar consolidated its surge: EM forex jumped: Gold held its gains: Oil sank: Metals were mixed: Miners boomed: EM stocks to the moon: Junk eased: Yields lifted: Stocks marked time: US jobs were reasonable: Total nonfarm payroll employment rose by 638,000 in October, and the unemployment rate declined
Its a day of retracement as expected across risk markets here in Asia following big surges across stocks, commodities and non-USD currencies after the US election. Traders are now gearing up for tonights US unemployment print that will likely come down at the same time Trump loses the election in Pennsylvania. Gold has slipped after
Lot’s of excitement over this: As I have noted many times, BTC and gold share an investment narrative insofar as both are seen as hedges against USD debasement. Some have recently been plumping for BTC to overtake gold. Has it? The answer is no and, for what’s it’s worth, I don’t think it will. BTC
Stock markets continue to love the US election non-outcome as Europe and Wall Street lifted again overnight with Treasury yields coming back slightly as currency markets went into violent anti-USD mode. Oil prices retraced slightly but undollar currencies like gold and Bitcoin shot to the moon! The latest FOMC meeting was a non-event although some
DXY was slammed last night: The Australian dollar is a cork in the storm: Gold jumped: Oil fell: Metals ground higher: Miners were mostly stronger: EM stocks gapped into madness: Junk whoa: US yields were stable: Stcoks were anything but: We’ve caught the express train from a dangerous double-top to verging on new highs for
Yet another green day across risk markets here in Asia as all the hand wringing over the US “election” has come to naught, with all traders hitting the buy button, regardless of the outcome. Gold has been unable to hold on to its recent swing through the $1900USD per ounce level after a retracement in
Stocks continue to love the US election non-outcome as both Europe and Wall Street surged overnight while Treasury yields retraced sharply lower as the hope of any stimulus faded with a locked or GOP senate (same thing really). Currency markets calmed down slightly with USD still in defensive mode, as oil prices continued their rebound
DXY sank last night: The Australian dollar had one wild day: Gold was subdued: Commodities bounced: Miners fell: EM stocks went nuts: As junk jumped: While Treasuries crashed: And stocks soared: Westpac has the wrap: Event Wrap US service sector ISM fell to 56.6 (est. 57.4, prior 57.8), reflecting the potential of a slowdown in growth
What a day! Stocks, commodities, currencies and futures are going ga-ga over the US “election” as volatility rears its beautiful, shiny head across traders screens today. In a nutshell, USD has been moving alongside the up and down probability of a Trump enema or a Biden bye-bye, leaving a wake of volatility in all dollar
Stocks are loving the US election as Europe and Wall Street advanced overnight and continued to move higher in futures – a stark difference to the 2016 election. Treasury yields continue to move higher, the ten year now at 0.9% to almost a yearly high while USD is still in defensive mode, dropping against most
DXY got hammered last night: The Australian dollar blasted off: Gold was firmer: Oil too: And metals: Miners went vertical: EM stocks lifted: Junk firmed: Treasuries sold again on the inflation bogey: Buy stocks! Westpac has the wrap: Event Wrap US September factory orders rose +1.1%m/m (est. +1.0%m/m, prior +0.6%m/m revised from +0.7%m/m). Ex-transport came in at +0.5%m/m
More green across Asian stock markets today as traders discount concerns leading into the most volatile trading week (and month?) of 2020. The latest RBA meeting had the policy wonks finally join the rest of the “civilized” central bank world as they fire up the printing presses and cut rates to historic lows. USD is
Risk is rebounding again in fits and spurts as volatility spikes before the US election with the USD losing ground against everything but Euro while Wall Street advanced – except tech stocks. More positive economic data with the latest ISM Manufacturing PMI print coming in hotter than expected, repeated in the EU and UK as
DXY was firm last night as EUR breaks: The Australian dollar bounced off 70 cents again: Gold still looks troubled: Oil bounced just because. The outlook is terrible if Biden wins as Iran joins Libya in a new gusher Metals were mixed: Miners did better: EM stocks too: But EM junk issued a new warning:
A sea of green across Asian stock markets today as we start the most volatile trading week of 2020. USD is retreating against some undollars with gold managing a small boost to $1884USD per ounce, but still well below its previously well supported $1900 level: The Shanghai Composite is again stuck with a scratch session,
Via Macro Voices: Erik: And where do you see the inflation story coming into this? Central Banks Must ‘Play Their Part’ Tian: So I think we need to think about inflation both from a structural point of view and a cyclical point of view. So the thing to say is cyclically, when unemployment rates are still
