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.
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
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
Via Bill Evans at Westpac: The Reserve Bank Board meets next week on November 3. The Bank will also release its November Statement on Monetary Policy on November 6 where it will provide detailed colour around the policy decisions and print its revised growth forecasts. The Bank has not updated its forecasts since August 7.
So begins what could be the most volatile trading week of the year as the US election finally comes to a hand. Risk markets retraced once again on Friday night, capping off a poor week for stocks and undollar assets like the Australian dollar and gold. The backdrop was some good economic data from the
Another very mixed day across stock markets in Asia to finish the trading week (and month) with the bounces overnight on Wall Street not translating into anything meaningful. There’s been a co-ordinated bounce against USD, with gold managing a small boost to $1875USD per ounce, but still well below its previously well supported $1900 level:
Via Doubleline: If launched, central bank digital currencies (CBDCs), as I have recently warned, will put at risk the independence of monetary policy and what little is left of fiscal discipline within their borders of circulation.1 Central banks are not stopping at the replacement of money as we have known it. In conjunction with their developmental
The ECB is back in the game. Here is last night’s statement: Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our press conference. We will now report on the outcome of today’s meeting of the Governing Council, which was also attended by the Commission Executive Vice-President, Mr Dombrovskis. The
Risk markets fought valiantly to get back into the green overnight after the previous slump, as very encouraging US economic data – specifically a record GDP print – helped stave off the sellbots. The ECB had its monthly meeting, stating everything as she goes, however the post press conference saw Lagarde dampen spirits as the
DXY is up and away as EUR sinks: The Australians dollar was hammered: Gold is close to a major technical break: Oil is already through the same: Metals fell: Miners bounced: EM stocks too: Junk was OK: Treasuries were flogged: Stock pain is forgotten: Westpac has the wrap: Event Wrap US 3Q GDP rose +33.1% (qtly, annualised) –
Not quite a sea of red across stock markets in Asia today despite the big falls on Wall Street and in Europe overnight, with mainland Chinese shares actually advancing. There’s been a co-ordination of weakness in other risk assets like Australian dollar and gold with the shiny metal slowly trying to get back after its
Raoul Pal asks the question: Bitcoin is eating the world… It has become a supermassive black hole that is sucking in everything around it and destroying it. This narrative is only going to grow over the next 18 months. You see, gold is breaking down versus bitcoin…and gold investors will flip to BTC pic.twitter.com/ox7KRY5VRo —
Its risk awfff as both Wall Street and European shares tumble in the wake of lockdowns on the continent and lunatics loose in the US election. Stocks fell over 3-4% on both sides of the Atlantic to new monthly lows with defensive assets like Yen rising, while gold and other commodities fell sharply. Asian shares
DXY took off last night: The Australian dollar was hammered: With EMs: Gold puked: Oil may halve here: Metals fell: Miners were flushed: EM stocks gapped: With junk. Watch EM for an early warning on more carnage: Treasuries steepened, bizarrely: Stocks are one bad day from delivering the greatest bearish double-top you’d ever care to