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.
By Chris Becker It was the return of King Dollar overnight as the USD strengthened against all, smacking gold down nearly $80USD per ounce in the process, pulling the Australian dollar and others in the process as Wall Street stumbled. This was mainly due to the release of the latest FOMC minutes that while still
DXY roared back last night: The Australian dollar was bashed: Gold was creamed: WTI is bid by a robot: Metals did OK: Miners not: Nor EM stocks: Or junk: Yields lifted: And stocks fell: The culprit was Fed minutes which simply weren’t dovish enough: Participants observed that uncertainty surrounding the economic outlook remained very elevated, with
by Chris Becker Outside China its been a pretty good day for stock markets across Asia today, following through on the advances on Wall Street overnight, with Australian stocks still cheered on as earnings season rolls by. The PBOC fixed Yuan much higher against USD today, sending the onshore trade down to the 6.91 level
By Chris Becker Wall Street was again pushed higher by tech stocks as the NASDAQ nearly up 1%, as the USD fell to a new two year low against almost everything as the risk complex sharpens its concentration into bubble like territory with Treasury yields also down to record lows. Meanwhile European stocks continue to
by Chris Becker Stock markets are again mixed across Asia, with a failure to make any advances despite Wall Street lifting overnight, although Australian stocks were cheered on as earnings season made a few surprises. Gold is following through on its overnight breakout to almost breach the $2000USD per ounce level again, while silver is
By Chris Becker Wall Street was again pushed higher by tech stocks as the NASDAQ lifted 1%, while European stocks followed meekly in a session lacking any significant news or data events. Bond yields continued to firm however with a weaker USD pushing commodities higher, alongside undollar assets like gold, Bitcoin (above $12000) and the
by Chris Becker Stock markets are quite mixed across Asia, with Chinese stocks leading the way due to PBOC injections while the rest of the region is slumping from the poor confidence on Wall Street’s close on Friday night. Gold continues to moderate from its big correction last week, still anchored at or around the
By Chris Becker Wall Street was sanguine on Friday night with scratch sessions across the board, as European markets slumped as Euro came back strongly against USD. The ASX200 will have an interesting start to the week with the lack of confidence over the weekend translating to a possible 1% slump at the open that
DXY rebounded then faded last week. Same for EUR: The Australian dollar lost its luster: I warned you gold is volatile. I would equate this correction with 2003 as the world emerged from the tech wreck and gold popped then dropped as it entered the next phase of the great Greenspan bubble: Oil has no
by Chris Becker The RBA Governor is trying to jawbone the Australian dollar lower in his testimony to Parliament today, stating the cash rate is likely to be 0.25% for five years or more, giving deposit holders around the country a coronary. The dollar is moving slightly lower, with the hourly chart showing a break
By Chris Becker Wall Street stumbled on the stalemate on fiscal stimulus measures from Congress, although the NASDAQ kept going higher, with the most interesting moves on bond markets as the US initial jobless claims improved better than expected. The USD oscillated around the economic reports, finding more strength later in the session but gold
by Chris Becker Stock markets are generally have good sessions across Asia with gold moderating from its big correction previously, having not moved since the London fix last night at the $1933USD per ounce level, while silver is poised just below the $26 level, ready to breakout: In mainland China, the Shanghai Composite is toying
by Chris Becker The latest numberwang aka monthly employment report from the ABS has had little change on the Australian dollar which oscillated around its previous nightly close at the 71.70 providing only scalpers with opportunities around the release: Local stocks however hated the print with the ASX200 dropping nearly 1% at lunchtime: There’s been
by Chris Becker Stock markets are having mixed sessions across Asia with gold continuing its big falls from overnight, cracking the $1900USD per ounce level going into the London fix, with silver also crashing through the $24USD per ounce level: In mainland China, the Shanghai Composite was down sharply before the lunch break, almost by
by Chris Becker The precious metals complex is teetering again after a bludgeoning overnight with gold leading the way this time, down to just above $1900USD per ounce in a sharp move this morning: Silver is close behind at the moment, just hanging on below the $25USD per ounce level and ready to crack below
By Chris Becker Tops might be in across share markets as Wall Street leaped to a new before a sharp late reversal sent the risk complex reeling, taking precious metals with it as USD came back to strength. Stronger PPI data saw bond yields rise while continued stalemates over US fiscal measures and falls in
by Chris Becker Stock markets having rallied across Asia – save for mainland China – with the return of Japanese traders and a still ebullient Wall Street overnight. Gold is floundering however, pushed well below recent support levels and just hanging on above the $2000USD per ounce level going into the London fix, with silver
by Chris Becker Despite some ugly economic prints from Singapore and South Korea and increased tensions between the US and occupied Hong Kong, the return of Japanese traders to their desks has seen risk lift across the Asian region, with the Nikkei 225 and ASX200 both up 1% or more. The big drop in South
By Chris Becker A modest night on risk markets with the NASDAQ slipping again with not much conviction on other stock markets either as the USD strengthened against some of the major currency pairs. Bitcoin made a new yearly high, pipping the $12000 level while silver outshone gold which remains steady after its Friday session
by Chris Becker Risk markets are still in divergent mode, not helped by the long weekend here in Asia for Singapore and Japan, with reaction to Trump’s executive orders muted. Gold has survived its Friday night drop, heading into short term support just above the $2030USD per ounce level today, with silver the one that’s
by Chris Becker The reaction from Friday nights headline US unemployment figures has been modest so far in currency land on the post-weekend open here in Asia, partially due to long weekends for Japan and Singapore. Interestingly, the PBOC has weakened Yuan sharply against USD with its latest on shore fix, bringing it up to
By Chris Becker Another US unemployment print in the midst of the COVID-19 pandemic passes by with big swings again, with the internal picture still looking woeful, yet Wall Street loved it and pushed to new highs, although tech stocks wobbled. Speaking of wobbliness, precious metals started to tumble in the Asian afternoon session after
by Chris Becker Risk is taking a nosedive going into the afternoon session here in Asia in the wake of Trump’s executive order around another Chinese app, with USD coming back against most of the undollars and stock markets getting very nervous before tonight’s US unemployment print (NFP). Gold has surrounded some ground from its
By Chris Becker Another record high on Wall Street, pushing the risk complex even higher and really starting to diverge from other global stock markets that are doing a better job at discounting risk through the pandemic. No new fiscal measures agreed to by Congress and the White House either, going into tonight’s NFP print,
by Chris Becker Outside Australia, Asian stock markets are in retreat mode after being mixed yesterday as confidence fades going into tomorrow night’s NFP print, with all risk going into undollars like Yuan, Bitcoin and Yen and of course precious metals. Gold is having another stab at the $2050USD per ounce level with silver again
By Chris Becker Another record high on Wall Street, pushing the risk complex to yet more stretched valuations as gold also makes another daily record high above the $2000USD per ounce level, with silver outshining with a near 5% gain to be above the $27USD per ounce level. Its all about the weakness of USD