According to Nomura, right now they do: Speculators look ready to take risks again; global macro hedge funds increasingly selling USD in their hunt for yield As the curtain falls on “sell in May” risk, speculative investors increasingly look ready to take risks again. •Global macro hedge funds selling USD and buying EM equities more
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.
JPM on BTC sound and fury signifying nothing. Think tulips: Despite tremendous volatility in Cryptocurrencies this week, movements in global markets have been even tamer than this year’s other corrections in January due to meme-stock trading or in February due to a high-vol sell-off in US Rates. A basket of the three largest Cryptos (Bitcoin,
After a very solid start to the trading week, Wall Street stumbled overnight yet again on more FedTaper talk as officials were unable to allay fears about”transitory” inflation. Despite strong house price results, the USD and Treasury yields pulled back again in unison, while European markets largely tread water which should translate into tepid sessions
The story of forex right now is the rise of the Euro as the continent gets its vaccine together and hurtles towards reopening. This is triggering one more downleg for DXY which would normally send capital ruching into commodity and EMs but that has been short-circuited by China. DXY has fallen to critical support levels:
It’s green across the board here in Asia, with Chinese stocks leading the way as a risk on mood pervades stock markets despite the dramatic pullback in iron ore prices The USD is weakening against most of the majors, particularly Euro and Yen but especially losing a lot of ground against Chinese Yuan today. Bitcoin
UBS with the note: We expect the USD to continue to depreciate this year in line with the recovery of global growth, but we forecast a broad-based USD rebound next year. Next year the US is likely to lead in unwindingCOVID-19 monetary stimulus, as the labor marketshould be sufficiently robust for the Fed to do
Wall Street has started the trading week with a bit more confidence despite yet more talk of tapering and high inflation from Federal Reserve members overnight. The USD and Treasury yields pulled back slightly as stocks were bid across the board, even European bourses putting on better gains than expected after a tepid start here
The forex markets are beginning to acknowledge the MB script ahead for weakening inflation as China hits the brakes. There is lots of wood to chop here but it has begun. DXY was soft and EUR firm: The Australian dollar clung on: Oil rallied. Gold held: Dirt was mixed. There’s big downside ahead for copper
Asian stock markets have had a steady start to the trading week with some mild sessions across the region, following quite a tepid finish on Wall Street on Friday night. The USD has given back some of its gains with most majors gapping slightly higher this morning and firming going into the London session, although
Friday night saw yet another mixed finish on Wall Street with sentiment continuing to sour risk appetite with the latest US home sales data overshadowed by yet more taper talk from a variety of Fed officials. The USD bounced slightly while Treasury yields ranged sideways in a very cautious mood. Commodity prices were all over
Forex markets were relatively unexciting Friday night but under the surface significant moves took place as DXY firmed, commodities slumped yields fell back with them. Is this the topping of the inflation panic? DXY was firm as EUR fell back: Australian dollar was weak against all DM crosses: Gold and oil did OK: But base
Asian stock markets are putting in very mild sessions to finish the trading week after a tepid bounceback in the previous session despite a solid lead on Wall Street overnight. Crypto currencies remain under enormous pressure with Bitcoin unable to push through the $40K level with a few failed attempts during today’s session: The Shanghai
Overnight saw some upside volatility return to equity markets due to a mish mash of good and bad economic news and some further FedTalk from hawks and doves over the coming tapering (or not tapering) of the US economy, plus the jumbles around the ever interesting labour market. The USD took back its gains against
DXY was down again last night after its brief flirtation with unexpectedly hawkish Federal Reserve minutes. EUR is strong: The Australian dollar jumped though remains heavily contrained against all DM crosses: It is losing altitude versus EMs now as well: Probably the major trigger for the night was slumping oil as the Iran deal looks
Stock markets are putting on a mild bounceback across Asia following the volatile moves on overseas markets overnight, with Wall Street overreacting to the latest FOMC minutes. Some viewed the talk around inflation concerns as hawkish, sending up the USD and bond yields as a result, but some calm has returned to risk markets today.
Yesterday I identified (that is, made up) the disastrous four-headed hydra crypto chart pattern. And, by god, it did not disappoint with BTC crashing 30% last night as rumor of the pattern swept the internet! As we know, correlation is always causation. Just ask Wall Street. Here you go with another hapless attempt to bring
Volatility is raising is ugly (or beautiful) head again with risk markets wildly oscillating overnight as the latest FOMC minutes point to a possible change in the tapering of grand old stimulus measures in the months ahead. The USD surged back into action against the major currencies, while Wall Street dived down over 1% before
For much of the evening the US dollar was headed back into the abyss and the Australian dollar marching higher. But that did not last once Fed minutes were released and whispered the word “taper”. All markets jackknifed, not least the AUD which reversed down like a falling stone. DXY: The Australian dollar is still
Inflation concerns are still rocking stock markets with Asian bourses deep in the red in today’s session, with more inflation data from Europe (and the UK) out later tonight. The US remains weak against most of the major currencies, with gold still climbing on its way to the $1900USD per ounce level. The bottom has
Mwahaha. The disastrous four-headed hydra pattern has appeared on BTC’s crashing chart (and yes, I just made that up but I expect a Hydracoin to appear very shortly after this post): Today’s problem? China: Which has banned banks from providing BTC services. Warned that crypto is speculative. That’s the future right there. Does it constitute
HSBC with the note. Some good themes. My view remains dirt will break before the RBA: Yesterday I talked about AUD headwinds and I mentioned that AUD trades poorly relative to its terms of trade. ToT is near all-time highs touched in 2007 and 2011 while the currency can’t even get above its 2018 high.
Another discerning change in confidence and sentiment overnight with Wall Street sharply reversing in the last hours after being up throughout most of the session. The cascade effect has seen Asian stock market futures rise in volatility with a probable 1% falls across the board on the open this morning. The USD also slumped, sending
The weakness afflicting the US dollar since its questionable labour market report continued overnight. Indeed, DXY is threatening to break down as EUR surges: The Australian dollar has badly lagged the DXY move lower and is fading against EUR: But a falling DXY is always fun for dirt: Not so big miners as China jumps
Stock markets are finally finding their feet here in here in Asia after a wobbly start to the trading week, with Japanese stocks advancing strongly after a big stall yesterday. The co-ordinated rise in commodity prices overnight has helped confidence, with gold surging to $1870USD per ounce, while cryptocurrencies flail about as Bitcoin struggles at
Another terrific note from Nordea: Finally, there was a pick-up in volatiliy. At least in the equity market. Bond and currency markets didn’t react much at all to the surprise surge in the US CPI “inflation” index. By the close of the week, the latter two markets (2y/5y/10y yields and the DXY index) had retraced
It’s fair to say that I’ve given crypto a fair hearing. I’ve tracked its rise. Pointed out its contradictions and embraced its uses and logic where they exist. I have always been skeptical. To me, it just looks like an attempt to create private money, which never works because its runs afoul of the sovereign.
An inability to find confidence hindered risk markets overnight, with only commodities putting on gains with European and US stocks pulling back after what was a solid finish on Friday night. A lack of economic catalysts and concerns over Middle East tensions may be the underlying cause, but some dovish comments from both BOE and
Overnight action continued the see-sawing action between US yields and other asset classes that has defined the last few months. This time it was yields up and other assets down. DXY was down as EUR bounced: The Australian dollar was pretty much flat: Oil and gold were up with all of the usual soft DXY winners.
Stock markets are wavering in their resolve here in Asia following the meltup on Wall Street Friday night, with Japanese and Taiwanese stocks falling again on continued COVID concerns. While gold continues to surge higher, now at $1852USD per ounce, the crypto world is all gaga following the abandonment of Bitcoin by Elon Musk, with
Ah yes, the wonder that is crypto. Decentralsised, disintermediated, democractic. A revolution. Ahem…yeh right. Via FTAlphaville: Sooooo remember Tether? The last time we wrote about the “dollar-backed” stablecoin around these parts was back in February, after the New York District Attorney’s office decided to suspend the company — and sister crypto exchange Bitfinex — and