Stocks are generally down across Asia with only local issues rising due to the fall in the Aussie dollar as the latest unemployment print undershot, sending interest rate expectations down with it. The risk off mood hasn’t been helped by a slip in Chinese industrial production numbers alongside retail sales. Chinese stocks are diverging in
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.
DXY was strong again as EUR and CNY sank: The Australian dollar fell again against DMs: EMs were mostly weaker still: Gold bounced: And oil: Metals are signalling bad: As are miners: EM stocks rolled: Junk held on: All bonds were strongly bid: Stocks edged down: The day-to-day data was OK with US inflation still
By Chris Becker An unexpectedly lower UK CPI print and continued focus on Hong Kong, combined with all eyes on the Trump impeachment inquiry is seeing risk markets on both sides of the Atlantic wobble as USD becomes mixed against the majors. Gold is making a weak comeback while oil prices are trying to build
Stocks are falling across the region as tariff concerns over the Chinese trade deal mount alongside increased tensions in Hong Kong. The RBNZ lift its interest rate unchanged which saw the Kiwi leap higher while the Aussie dollar continues its slow deflation as the USD firms against the majors. Chinese stocks are really on the
By Chris Becker Swings and roundabouts as the risk meter returns to the positive polarity overnight, with European and US stocks lifting in response to a delay in proposed US tariffs on European autos. The USD is mixed against the majors, with Pound Sterling lifting alongside the Swiss Franc while Euro is falling as the
The mixed session from overnight markets has seen an equally mixed result here across Asia as tensions in Hong Kong remain high, while tech stocks and a softer Yen are lifting risk appetites only in Japan. The USD continues to firm against most of the majors, in particular Kiwi as traders await tomorrow mornings RBNZ
Not much for for Aussie assets today as the Australian dollar falls away: XJO is down moderately but still has a bullish chart: Bonds are bid: Dalian is flat so far: Big Iron has woken in fright from discounting only lollypops and rainbows. FMG at new highs as this unfolded was truly bizarre stuff. Plenty
From the excellent Sally Auld at JPM: Adding a formal QE forecast to the outlook After a few years of policy stability, 2019 delivered plenty of surprises on the monetary policy front. First was the RBA’s volte-face in February, when the Governor declared that risks to Australian monetary policy had become two-sided. This was followed
DXY was down last night as EUR rose and CNY fell: The Australain dollar was dumped anyway: As gold fell: And oil: Plus metals: And miners: EM stocks flamed out: Junk fimed: US yields eased: Bunds eased: Aussie bonds were bought: Stocks edged down: Westpac has the wrap: Event Wrap Brexit Party leader Farage said that
By Chris Becker The trading week is having a mixed start as concerns from the Asian trading session yesterday transferred to Wall Street, particularly the lack of progress on a US/China trade deal but also the escalating tensions in Hong Kong. While stocks are trading in the US, debt markets are closed for Veteran’s Day
By Chris Becker The trading week finished on an upbeat note with sentiment still in the clouds about a pending US-China trade deal as the USD broke to a new record high against the major currencies, alongside US stocks. Gold fell to a new monthly low while oil prices pared back recent gains as Bitcoin
Suddenly, DXY is back and it’s bad as EUR sinks: The Australian dollar fell sharply against DMs: It was mixed agianst EMs: Gold was bashed: Oil lifted: Metals fell: Miners were clubbed: EM stocks flamed out: Junk was soft: US yields edged up: Bunds went the other way: Aussie kept selling: Stocks hit new
The ebullience from overnight markets has not translated into meaningful gains here in Asia with most bourses struggling with scratch results late in the session. The potential for a US China trade deal before Xmas is pushing risk appetites higher – but too high and too fast – so a retracement is inevitable. Gold is
By Chris Becker Stocks are riding the waves of transPacific press releases and editorials as positive news surrounding the US/China trade deal is sending USD higher and lifting all risk assets. The EuroStoxx 60 hit a six year high as Brexit concerns have evaporated, while gold has broken through multiple support levels losing more than
The failure to strike a US China trade deal continues to weigh on markets here in Asia as signs are mounting that all the posturing and posing by Chairman Pooh and President Wiggum is just that: a show. Stocks are looking rocky going into the northern hemisphere session and the USD continues to firm against
So say GaveKal: For the last five years, the US dollar has been strong, supported by: A tightening relative liquidity environment, as the Federal Reserve ended quantitative easing, raised short term rates and began to contract its balance sheet. Meanwhile, other big central banks—notably the European Central Bank, which in 2015 embarked on its own
DXY was up last night as EUR fell: The Australian dollar fell against all DMs: But couldn’t match plunges in EMs: Gold lifted: Oil fell: Metals too: And miners: Plus EM stocks: Junk was mixed: Bonds were bid: Stocks held on: Westpac has the wrap: Event Wrap Reuters reported that the meeting between Presidents Trump
By Chris Becker News of a delay in a potential US/China trade deal is causing Wall Street to wobble again as a quiet session without any other catalysts apart from a spike in oil inventories keep risk taking low. European markets advanced slightly on a slight tickup in service PMIs, while gold and oil remained
The outright optimism from a finalisation of a trade deal between US and China yesterday has been switched to that of caution with most stock markets putting in scratch sessions in response to the stall on Wall Street overnight. The Kiwi is dropping on an unexpected rise in New Zealand unemployment rate while the Aussie
By Chris Becker Risk markets tumbled and the USD soared as data from the US suggested GDP growth is going to be softer than expected. Fourth quarter GDP is now estimated to be 1%, according to the Atlanta Fed after the Markit services PMI came in barely above expansion. Gold shattered below $1500USD, with all
Outside of Australia, stock markets here in Asia are bursting in hope and optimism, with new record highs from Wall Street overnight translating into big gains across the region. Japanese stocks were the highest, led by a big selloff in safe haven Yen, while today’s RBA meeting has translated into a big lift in Aussie
FT says he is mulling doing so: Trump administration officials are debating whether to remove some existing tariffs on Chinese goods as a concession to seal a partial deal that would pause the trade war with Beijing as early as this month. According to five people briefed on the discussions, the White House is considering
NAB has lifted its 2019 year end Australian dollar forecast to 69 cents from 65 cents previously: Is that having left here yesterday with plenty of chatter about AUD/USD looking poised to test some pretty significant overhead technical resistance levels, the pair is back down below 0.69 close to where it was before the US dollar started
DXY rebounded firmly last night as EUR sank. CNY is still rising: The Australian dollar fell sharply versus DMs: And EMs: Gold eased: Oil bounced on reflation hopes: Metals were mixed: Miners strong: EM stocks are ripping: But junk is subdued: Bonds forgot the Powell pledge and got flogged: But stocks don’t care about anything