DXY was roughly stable last night: Allowing the Australian dollar to break to new closing highs against all major DMs: It is stronger than EMs for now as well: Gold lifted: And oil: Metals fell: Miners struggled: EM stocks also want to break out: Junk was mixed: Bonds sold: Stocks edged higher (of course!): US
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.
With most markets here in Asia in light volume mode, there’s been a bit of downside volatility that’s not unexpected going into the Christmas period. The PBOC increased the Yuan fix well above the 7.01 handle and offshore trading has followed in kind, while Bitcoin has jumped higher from the weekend gap – now up
By Chris Becker Wall Street continued the Santa rally with the fourth straight record high week with confidence surrounding the US/China trade deal builds. European stocks also rose as the BOE kept rates on hold in its first post election meeting, while oil prices finally fell back after a stellar run. Looking at the action
DXY was up strongly Friday night as EUR sank: The Australian dollar jumped anyway versus DMs: And EMs: Surprisingly, net positioning on the CFTC moved more short last week to -46k contracts, though the trend is clearly towards more neutral: Gold held on: Brent fell as the US rig count jumped. The market does not
Asian markets had a mixed end to the trading week with no real advances across the region despite the usual record highs on Wall Street. The Shanghai Composite was falling going into the close, barely above the long held 3000 point resistance level, while the Hang Seng Index is putting in a scratch session to
By Chris Becker As traders around the globe slowdown for the Christmas break, Wall Street was the only major market to put on meaningful gains, with the absence of news translated into good news. The latest BOE meeting was a hold as the bank needed to evaluate the fallout from the election, while US initial
DXY was stable last night: The Australian dollar spiked on ABS jobs numberwang: Gold is still holding up: Oil is off and running: Metals were firm: Miners stable: EM stocks too: Junk fell: Treasuries were bid: Bunds sold: Aussie got pole-axed on numberwang: Stocks are focussed on the moon: Westpac has the wrap: Event Wrap
Asian markets were able to absorb a triple whammy today, with the latest BOJ meeting, the usual numberwang that is Australian unemployment, and the impeachment saga in the US. Meanwhile the PBOC made their biggest cash injection into the market since January and pushed the Yuan fix back above the major 7 handle. The Shanghai
By Chris Becker Wall Street stumbled at the end of the session as all eyes were on the growing impeachment saga instead of the fundamentally divergent bubble that is occuring across risk markets. European markets also kept tripping up as the Santa Claus rally loses steam going into the final trading weeks of the year.
Asian markets are putting in scratch sessions across the board as jubilation about the US/China trade deal turns into hesitation instead. The USD is not moving against the majors, with Yen buying accelerating and putting a damper on risk assets. The Shanghai Composite has been unable to advance significantly past the long held 3000 point
By Chris Becker Wall Street edged to a nominal new record high overnight but only just as the USD rose against most of the majors, Pound Sterling in particular falling as the hard Brexit firms. Economic data from the US was positive, although US Treasury yields lifted slightly, while Bitcoin cratered to a new monthly
DXY was up last night: The Australian dollar was universally belted: Gold eased: Oil appears to want more shale, which it does not need: Metals are still meh: Miners rolled: EM stocks jumped: With junk: Bonds were a mix: Stocks were still bid: Westpac has the wrap: Event Wrap US industrial production rose 1.1% in Nov
Asian markets are aligning again with overseas risk taking with optimism surrounding the US/China trade deal building as the USD strengthens again vs the undollar assets. The Yuan fix remains below the 7 handle again, while Bitcoin continues to selloff, ready to tackle the November lows. The Shanghai Composite was floating along and then shot
By Chris Becker It’s all about record highs on stock markets in the wake of the US/China “phase one” trade deal with Wall Street bounding to a new high, dragging risk assets along for the ride. Oil prices continue to melt higher while even the FTSE is leaping forward now that Brexit is certain. Today
By Chris Becker It was all about the US/China “phase one” trade deal on Friday night markets with a surprising reversal after the usual all-in sentiment moved to one of caution, with scratch results on Wall Street the result. European markets absorbed the UK election results with some volatility as Pound Sterling calmed down after
DXY roared back Friday night: The Australian dollar was universally puked: CFTC positioning was unchanged but the data concludes Wednesday so the late week fireworks will appear next week: Gold is threatening to bottom: Oil is marching on: Metals meh: Miners to the moon still: EM stocks flamed out: Junk was firm: Bonds were bid
Who said polling was dead. One UK exit poll and it’s chaos: Here we go. The polls have closed, and vote counting has started. Before we get the official results, we can dissect the massive BBC/ITV/Sky exit poll, which was released moments ago. It predicts a majority government for Boris Johnson’s Conservative Party, with 368
A very mixed session across the region today as risk taking diverges as a result of a more accommodative Federal Reserve overnight which sent USD lower against all the major currencies, which affected the ASX200 the most. Concerns that Trump may do something to distract from his impeachment woes The Shanghai Composite dropped 0.3% to
By Chris Becker Last night saw the release of the latest US CPI print which nudged slightly higher, sending stocks higher as well but following that the FOMC decided to keep rates on hold which put stock futures into a little tizzy. Expect some mild drops on the open here in Asia, with the resulting
DXY fell last night as EUR rose: The Australian dollar blasted off to the moon: Gold firmed: Oil fell: Metals are now chasing the rally: Miners up and away: Plus EM stocks: And junk: Bonds were bid everywhere: Except Australia, go figure: Stocks eked out a gain: Westpac has the wrap: Event Wrap The US Federal
Japanese stocks tread water today as other markets leaped ahead on the news that the Twit-in-Chief may delay the upcoming December 15 tariffs, although currency markets were relatively stable as were gold and Bitcoin. The Shanghai Composite closed nearly 0.3% higher to 2924, building above the 2900 point level it broke on Friday, while the
Via Credit Suisse: The Fed’s liquidity operations have not been sufficient to relax the constraints banks will face in the upcoming year-end turn. Reserves are still insufficient; there are no true “excess” reserves; and large U.S. banks’ G-SIB scores are shaping up to be a severe binding constraint heading into the year-end turn. We have
DXY slumped last night: But so did the Australian dollar: Gold firmed: With oil: Copper is trying: Miners firmed: With EM stocks: And junk: Treasury curves flattened: Bunds steepened: Aussie split the difference: Stocks are stuck: Westpac has the wrap: Event Wrap US NFIB small business survey rebounded more strongly than expected to 104.7 (est. 103.0,
By Chris Becker Yet another night of second guessing again on overseas markets with stocks putting in scratch sessions while the USD oscillated against many undollar assets with Bitcoin falling, gold rising alongside Euro and Aussie dollar sinking to a new weekly low. Looking at the action on Asian markets yesterday where the Shanghai Composite