Asian stock markets are generally lower given the wavering confidence on global stocks with Chinese bourses closed due to NY holidays. The USD remains fixed a little against the major currency pairs in the wake of the higher than expected US initial jobless claims overnight. Bitcoin continues to soar ever upward, spinning spinning towards freedom,
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.
Initial weekly jobless claims in the US spiked a little higher than expected, with continuing claims also climbing higher but that didn’t dampen all risk spirits with Wall Street edging slightly higher. The USD was effectively unchanged as were Treasury yields while commodities saw mixed returns as oil pulled back slightly while gold fell back
As stated, my outlook for the Australian dollar is ongoing gains into the low-80s this year. One of the key reasons for this is a falling US dollar. Via Societe General: Jay Powell promised tokeep the punch bowl full, but it’s a low-key party thanks to stretched positions and Chinese New Year Housing costs
Asian stock markets are generally higher except for local stocks despite continued mixed leads from Wall Street and European stocks overnight with local currencies still strong despite the USD coming back a little against the majors in the wake of the lower US inflation print. Bitcoin continues to stall, falling below the $45K level as
I am consistently surprised at how thin-sliced Wall Street analysis is. The new commodity supercycle meme that has taken hold in recent months is a great example. Late to the party but now on board is JPMorgan: It is generally agreed that over the past 100 years, there were 4 Commodity supercycles and that the
US inflation data for January was much lower than expected, which took the edge of the weak USD meme running through currency markets as stocks also stumbled on Wall Street . US Treasury yields pulled back further while commodities kept on bidding with copper and oil making new yearly highs again. Bitcoin is having an
Outside of Japan, Asian stock markets have re-engaged to the upside despite the mixed lead from Wall Street overnight with local currencies still surging against a weak USD. Bitcoin has stalled in its epic journey, falling back but not below the $46K level following the Tesla bid as momentum reverts from its overbought status on
Will other corporates chase Tesla into Bitcoin? No, says JPM: Speculative bitcoin flows surge following Tesla’s announcement Tesla’s announcement this week that it has invested$1.5bn in bitcoin or 8% of its corporate cash reserves surprised markets by the magnitude of the purchases and re-invigorated expectations that other corporates will follow with their cash reserves. Although
For many years now MB has promoted the notion that macroprudential tightening can suppress house prices and stop currencies from following interest rates higher. Today that idea is not working in New Zealand after the RBNZ announced renewed MP tightening the currency took off, dragging up the Australian dollar with it. MUFG has more: RBNZ
Steady as she goes across most risk markets overnight, although Wall Street wobbled after European bourses stalled out due to the higher Euro. The USD remained weak against most of the majors although gold and silver were largely unchanged while US Treasury yields pulled back slightly after recently almost making a new yearly high as
Asian stock markets are somewhat mixed despite the strong lead from Wall Street overnight with Chinese bourses leading the way while local stocks fell back sharply as the Australian dollar accelerated against the short squeeze on USD. Bitcoin continues its epic journey higher, now up near the $47K level following the Tesla bid as momentum
A lack of events on the economic calendar but the potential for further US fiscal stimulus kept sentiment high overnight with new record highs on Wall Street. The USD remained weak against most of the majors with small gains in gold and silver while US Treasury yields almost made a new yearly high near the
Has the Australian dollar already topped? Most on Wall Street do not think so. JPM sees the recent correction as over: I had written extensively last week about the dislocation between G10 FX (lower) and stocks (higher) and on Friday we saw that correct in style as the USD sold off everywhere. It doesn’t feel
Asian stock markets are following the strong lead from Wall Street on Friday night with surges across the region, as USD remains weak following its shutdown post the very weak US unemployment print. Bitcoin has broken out of its funk, finally able to make a new high above the previous resistance level above $38K as
Since the great 2020 COVID-crash in markets, there has been an increasing siren song for a new supercycle in commodities. MB agreed with to this an extent given the cycle of extreme stimulus, led by the US Federal Reserve, which has set about debasing the US dollar. Such early cycle environments are always supportive of
Via DoubleLine: For every action, there is an equal and opposite reaction. In the case of international trade and global payments, the U.S. made aggressive use of sanctions and tariffs. With some merit, Washington has argued that these actions level the playing field for global trade or punish bad global actors. But a series of equal
The US unemployment print was bad, which is good for stocks, bad for USD so we saw a continuation of the rally in equities while a big reversal in USD fortunes jolted the currency markets. US Treasury yields made another new one month high while commodities rose across the board, except for iron ore and
The Australian dollar made up for lost time versus broader risk Friday night: The trigger was bad news being good news in US jobs following the virus third wave: The unemployment rate fell by 0.4 percentage point to 6.3 percent in January, while nonfarm payroll employment changed little (+49,000), the U.S. Bureau of Labor Statistics
Asian stock markets have swung back in confidence as USD swings into further strength going into tonight’s non-farm payroll (NFP) aka US unemployment print. Bitcoin has been relatively steady throughout the Asian session, still unable to make a new high above the previous level above 38K as momentum flattens out on the four hourly charts:
It’s all about King Dollar overnight with Wall Street regaining its former highs while OPEC+ commitment on supply saw oil break out to new post-COVID highs as Euro and gold dove off a cliff. US Treasury yields made a new one month high as economic data was firmer than expected, initial jobless claims much lower
Risk is on but not for the Australian dollar which is retesting the lows again: There is only one reason for this today. The excellent work of the uber-dovish RBA, via RBC: RBA Governor Lowe spoke overnight, erring towards more rather than less (confirmation of a rolling 3y YCCtarget, further emphasis on the degree of
Asian stock markets are in retreat mode as USD swings into further strength going into tonight’s trading session. Bitcoin has matched its previous week high at above the $38K level as momentum picks up on the four hourly and daily charts: Gold however alongside silver is breaking down, losing more than $15USD per ounce so
Wall Street at first put in some solid gains overnight but they evaporated towards the close as risk sentiment dampened slightly, despite some good economic and pandemic data. The USD remained strong against most of the majors but only moved higher against gold and silver, with oil prices spiking again alongside copper and Treasury yields
For now anyway. Via Credit Suisse come some technicals: A small top remains in place, with key support still seen at the 55-day average at .7583/64AUDUSD remains under pressure after briefly prodding beneath the crucial 55-day average support currently at .7583 in yesterday’s session. We thus maintain our bias for further mild downside as a
Another solid day for Asian stock markets as the risk swing higher continues, although Chinese shares are stalling. The USD remains firm against most of the major currencies with gold and silver still depressed following a failed breakout earlier in the week. Bitcoin is zooming higher, now at the $36K level as momentum picks up
RBC kicks us off: AUD: The RBA left its policy targets unchanged, as expected. Against expectations, however, it extended its QE programme, adding an additional AUD 100bn of purchases after the current programme ends in mid‐April. Expectations had been that the RBA would delay a decision until March or April and could taper purchases at
Another green day on Asian stock markets as the Reddit fizzle continues, with sentiment firming and volatility waning, at least in equities. The RBA’s hold and subsequent extension of QE has pushed the Australian dollar slightly lower as the USD remains firm against most of the major currencies. Bitcoin is hovering at the $34K level
A dove of immense proportions has perched upon Martin Place: At its meeting today, the Board decided to maintain the targets of 10 basis points for the cash rate and the yield on the 3-year Australian Government bond, as well as the parameters of the Term Funding Facility. It also decided to purchase an additional $100 billion
Wall Street rebounded overnight as the Gamestop short squeeze eased off and sights were set on silver instead. The USD gained more strength against most of the majors with Euro falling the sharply on poor German retail sales numbers. The US ISM PMI slid back slightly but is still in a strong expansive mode and