The RBA surprised everyone with an outsized 50bps rate rise this afternoon, sending the Australian dollar briefly higher before it settled back below the 72 level from whence it started this morning. Asian share markets are somewhat mixed with some round tripping and uneasy price action the order of the day across the region, but
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.
Last night saw Wall Street post some small gains while European stocks lurched forward following Friday’s release of the latest US non-farm payroll figures sent the USD higher against everything. Inflation risks are still showing everywhere with 10 year Treasury yields pushing through the 3% level again. Commodity prices were mixed with oil prices remaining
Asian share markets have started the trading week in robust fashion, except for local shares which are already pricing in a rate rise by the RBA tomorrow, plus the ongoing energy crisis. This bounceback from the firmer than expected US non-farm payrolls print from Friday night has seen a small bounce against the resurgent USD
Friday night saw the release of the latest US non-farm payroll aka monthly unemployment print, which came in slightly stronger than expected and keeps the foot on the Federal Reserve’s rate rise accelerator. This spooked stock markets somewhat with Wall Street falling, putting in a new weekly low in the process, so expect hesitation to
DXY may be basing: AUD was squashed Friday night: CNY is crucial to both: Oil looks very bullish and very bearish for everything else: Base metala were mixed and miners: EM stocks fell: \ The junk rebound is quite unconvincing: As yields popped with oil: Stocks fell hard: The big release Friday night was US
Share markets are having a relatively good final session for the trading week, as markets anticipate tonight’s US non-farm payrolls AKA unemployment rate print that will set the tone for risk taking for the rest of the month. In currency land, the Australian dollar is holding on to its recent gains while Euro wants to
DXY sank last night as the reflation trade rages on: AUD led the rocket: Oil, commodities, miners, EMS up! Yields were flat: Stocks flew: Westpac has the wrap: Event Wrap US private sector payrolls (ADP) disappointed with a 128k gain in May (vs 300k expected, April revised lower from 247k to 202k). The services sector was
Wall Street rebounded and the USD fell back on the latest employment reports from the US before tonight’s official unemployment NFP print, with the possible indication of a pause or slowdown in rate rises burgeoning risk taking. Some Fed officials and the interest rate markets don’t believe as much though with the 10 year Treasury
It’s a sea of red across Asian share markets as confidence falters after another poor lead from Wall Street and European shares overnight as inflation and growth concerns dominate. In currency land, the Australian dollar is slowing losing ground as Euro and Pound Sterling moved lower against USD. Oil prices are sliding with Brent crude
King dollar returned last night: AUD fell but roared on the crosses: Oil was squashed: Metals mixed: And miners: EM splat: Junk kerplunk: Yields spiked and the curve flattened: Stocks faded: Westpac has the wrap: Event Wrap US manufacturing ISM in May was stronger than expected at 56.1 (est. 54.5, prior 55.4). New orders rose to
Stock markets pulled back again last night following a stronger than expected ISM manufacturing print, pushing the USD up and sending bond yields higher, with the 10 year Treasury yield almost hitting the 3% level again. Euro dropped on more ECB hawkish talk of rate rises, with the Canadian central bank joining the party with
Another mixed session for Asian share markets reacting to the poor lead from Wall Street and European shares overnight which continue to be rattled by inflation concerns. In currency land, the Australian dollar took the latest GDP in its stride as Euro and Pound Sterling moved lower against USD. Oil prices are sliding with Brent
Stock markets pulled back last night with the return of Wall Street from its long weekend not embiggening further risk taking. The latest US consumer confidence print was higher than expected, but bond yields lifted on another confirmation of higher inflation in Europe, with yields for 10 year Treasuries pushed up towards the 2.9% level
DXY bounced last night: AUD fell though not versus the crosses. Notably JPY: Which means the CNY rebound will not last and neither will DXY down and AUD up: Oil popped and dropped: Metals fell: EM stocks too: The best risk indicator in the world, EM junk, is still sick: Treasury yields lifted: So stocks
A mixed session for Asian share markets after the previous solid start to the trading week, as traders await the return of the lead of Wall Street after a long weekend holiday. In currency land, USD is still moving lower against the majors, with Euro and Pound Sterling continue to lift while the Australian dollar
With Wall Street and other US markets closed for a holiday, momentum from Friday night’s exuberance on risk markets was enough to carry over and lead to more upside overnight. The record high German inflation print – now pushing 8% annualised – kept Euro elevated against USD while the bond futures market saw implied yields
Asian share markets have had a very solid start to the trading week, following through on the good mood from Friday night that saw multiple breakouts across risk markets. In currency land, USD is getting weaker despite the long weekend off for US traders, with Euro and Pound Sterling surging while the Australian dollar is
It’s breakouts everywhere on stock markets and most of their risk proxies with Wall Street continuing its bounce led by tech stocks while European shares also lifted as risk sentiment firms despite the usual Sell in May shenigans. The USD continues to fall back against the majors, particularly Euro while the Australian dollar has broken
Asian share markets have had a very solid finish to the trading week, following through on the good mood from overnight markets. In currency land, USD remains relatively weak against the majors, especially Yen while the Australian dollar has broken through the 71 cent barrier. Oil prices are inching higher, with Brent crude now hovering
The bounce is in with Wall Street continuing its post FOMC Minutes bounce, with European shares also lifting as risk sentiment begins to firm. The USD fell back against the majors, particularly Euro while the Australian dollar looks poised to breakout again. The bond market range traded, although the 10 year US Treasury yield pushed
Asian share markets are very mixed across the region, with only mainland shares in China rebounding as other markets continue to reflect volatile risk sentiment on overnight volatility. The Yuan dropped further today on more concerns about Chinese growth while other currency markets are seeing continued firming in USD although Yen is lifting on Governor