Australian Dollar

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.

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Macro Morning

By Chris Becker  The Fed surprise has turned into a Super Tuesday surprise with the promise of a moderate Democrat in the form of VP Joe Biden boosting Wall Street’s hopes that no stinking socialist will grace the White House anytime soon. Stocks soared, surpassing the 4% level with the Dow up 1000 points again,

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Macro Afternoon

The bounce stumbled overnight but has continued here in Asia as the news of the Federal Reserve’s surprise rate cut in the wake of the economic impact of the coronavirus has been absorbed without the fear on Wall Street. Further, a lead by VP Joe Biden in Super Tuesday has also assailed the Streets fear

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Macro Morning

By Chris Becker  The Fed has surprised and spooked markets by announcing an out of cycle rate cut, sending confidence down alongside bond yields, the USD and Wall Street. Nerves are frayed with US stocks closing nearly 3% lower and sending Asian futures down with them. Gold stacked on big gains however, rallying over $50USD

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Macro Afternoon

The bounce continues although its only a half inflated ball, with Japanese shares lagging and US futures slipping going into tonight’s session. This has all the hallmarks of a dead cat bounce and it must remembered that previous serious market corrections had big swings that were mistaken for recoveries. Gold is still struggling under $1600USD

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Blackrock: Aussie QE will send interest rates negative

Via Bloomie, bring it on: Prolonged equity losses and monetary easing by the Reserve Bank of Australia can send the nation’s 10-year bond yield into negative terrain for the first time, according to Craig Vardy, head of fixed income for Australia at the world’s biggest money manager. …Quantitative easing may be implemented in the fourth

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Macro Morning

By Chris Becker  Bouncy bounce bounce! Wall Street surges over 5% higher overnight as Asian stocks took the lead yesterday to push risk markets higher after a week or so of carnage. This is partly in response to a coordinated effort by central banks to start easing aggressively to counter the economic slowdown from the

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Macro Afternoon

It’s all about the bounce today with either the start of the recovery or a dead cat bounce underway as all equity markets save the local ASX200 have seen positive results for the first time in a week. Other risk proxies like USDJPY and gold have pushed higher, with Chinese stocks leading the magnitudes despite

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Macro Morning

By Chris Becker  Friday night saw an increase in intensity of selling, at least during the European session which some sanity prevailing on Wall Street eventually. Bond yield continued to fall to new record lows, while gold snapped and finally saw it selloff below the $1600USD per ounce, while oil and other commodity prices fell

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Macro Afternoon

Well it’s been a fun ride this week and it continues with another 3-4% selloff across the board today as fear turns to panic. Gold remains relatively steady but other safe havens are seeing bids with bond yields dropping and Yen soaring higher. This is indeed correction territory. The Shanghai Composite is playing catch up

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Macro Afternoon

The stock selloff deepened today in Asia as pandemic fears gripped markets across the region. Commodities remain depressed with the Australian dollar remaining well below the 66 cent mark vs USD while gold continued to recover from its previous profit taking slump. The Shanghai Composite is again the only market to see green on the

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Macro Morning

By Chris Becker  A modicum of stability arrived on equity markets overnight, but commodities – particularly oil – remain depressed, as bond yields continue to fall. The USD Index is up slightly having arresting some of the recent declines, but the big move overnight was a new low in the Australian dollar, hitting 2009 levels.

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Macro Afternoon

Asian markets continue their decline following the continued overnight rout on Wall Street, with local Australian stocks leading the selloff. Commodities and commodity currency remain depressed with the Australian dollar inching below the 66 cent mark vs USD while gold has recovered a little from its profit taking slump overnight. The Shanghai Composite is the

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Macro Morning

By Chris Becker  Fear is gripping equity and risk markets with nothing but selling overnight although to put in context, the bubblish S&P500 is now only back to its December 2019 high! Context is not traded on markets however, with the USD sold off again boosting Euro and hurting continental stocks, with Treasury yields also

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Macro Afternoon

Not quite the bath of blood on Asian markets although Japanese shares caught up to the fear over the weekend, while the usual buying of safe havens like gold and Yen abated somewhat as price was way overextended. The Shanghai Composite has fallen 1.6% to break back below the 3000 point barrier, currently at 2980

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Macro Morning

By Chris Becker  A bath of blood on stock markets overnight with both sides of the Atlantic down a whopping 3-4% across the board! Fear is a powerful ally for selling, and fear is spreading faster than the actual coronavirus and its impact on the global economy. For stock markets, its the correction it needs

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Macro Afternoon

Asian markets are not responding well to the weekend news, with non-mainland Chinese stock markets selling off broadly. Korean stocks are down more than 3% while local stocks are off 2%, as the fear surrounding the coronavirus from China spreads. Gold and other currencies gapped wildly on the Monday morning open with the shiny metal

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Macro Morning

By Chris Becker  Continued unease over the impact of the corona-virus is sending stocks down again, with Wall Street falling on Friday night. This wasn’t helped by a poorly performing US manufacturing PMI, alongside the services PMI implying a real economic impact from the virus. USD dropped against all the majors and gold soared again