Friday night saw DXY pull back sharply as EUR rallied: The Australian dollar bounced but then gapped lower this morning to be near new lows again: Gloriously, AUD shorts fell, leaving plenty more downside: EM forex is worse still: A golden rocket takes flight: Oil fell but not enough: Base metals were weak: Big miners
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.
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
The rumblings of fear are being heard across equity markets here in Asia with more safe haven buying in gold and bonds pushing stocks down across the region. Offshore Yuan is trading another handle higher at over 7.04 while the Aussie dollar has been pummeled to an 11 year low and briefly touched the 65
By Chris Becker Stock markets seem to be rising and falling in line with the pace of the coronavirus, falling again last night as the number of external fatalities rose, prompting more bond and USD buying and a reversal of the previous night’s stock gains. Gold continues to lift ever higher, although Yen is selling
DXY is the unstoppable freight train of global markets: The Australian dollar trapdoor opened: Gold is sending a nasty signal about the virus: Oil is deluded: Metals have a better notion: Miners will be crushed when iron ore breaks: EM stocks gave in: Junk woke in fright: Bonds boomed: Stocks hiccuped: Westpac has the data
The main takeaway in Asia is more stimulus planned by China, including another weakening of Yuan, now trading well above the 7.02 level in offshore trading with most stocks putting in positive sessions: The Shanghai Composite looks set to close about 1.5% higher, soaring past the 3000 point barrier as it continues its turnaround, while
By Chris Becker US stock markets followed the positive mood generated in Asia then enhanced in Europe, with the S&P500 again hitting another record high as the release of the latest FOMC minutes gave a “steady as she goes” signal. The deceleration in new cases of coronaviruses on top of continued stimulus plans announced from
DXY has blasted off: Once again, the Australian dollar sits on the cliff edge: EMs were stronger: Gold runs on: Oil popped: Metals meh: And miners: Plus EM stocks: Junk is still fine: Bonds were soft: Stocks, or should I say Nasdaq, to the moon: Westpac has the wrap: Event Wrap The FOMC minutes just released offered
It’s been a bounceback day here in Asia for stock markets at least, as fear swings back to hope, helped by the Chinese propaganda surrounding growth prospects viz. coronavirus, while the ratings agencies continue to downgrade 1Q 2020 growth across the region. The true arbiter is gold, which continues to climb above $1600USD per ounce,
By Chris Becker US stock markets returned from their long weekend and went on the defensive straight away, absorbing the Apple guidance cut with some mild falls on Wall Street after European bourses fell in response to a rout in Asia. The USD is up against all the majors – save gold which has zoomed
DXY has broken out and has the ears pinned back as EUR tumbles: The Australian dollar held on at the brink again. It has a horribly bearish descending triangle chart but its benefitting from “buy the dip” a la US stocks: EM forex was even weaker: Remarkably, gold is runnig hand-in-hand with DXY: Oil is
At The Australian comes the reality: Scott Morrison is caught between an immovable object and an irresistible force. The business community has escalated its demand for net zero carbon emissions by 2050 but the National Party rules out any such leap for the Morrison government. The logic of the huge 2050 transition is a carbon
By Chris Becker Risk markets traded thinly overnight due to the closure of Wall Street for a holiday, although stocks on both sides of the Atlantic did inch up slightly. While the USD Index was unchanged, mainly due to a flat lining Euro, commodity currencies like the Aussie and Loonie slipped despite a small lift
Watching stocks you could be forgiven for thinking that the world is about to boom. It is very diifferent in forex which is signalling the approach of a major bust with safe havens in demand. DXY is approaching a major breakout line as EUR drowns: Try as it might, the Australian dollar remains squashed by
Today’s session in Asia was marked (sic) with a lot of markdowns to GDP growth across the region in the wake of the coronavirus, with Japanese and Australian economies expected to feel the brunt the most in the first quarter. Asian stocks however are quite mixed with Chinese markets rallying on potential stimulus from the
By Chris Becker Friday night saw risk markets wobble slightly as the latest US industrial production numbers fall slightly while inflation expectations also pared back, although retail sales were upbeat as expected. Treasury yields fell slightly and are still signalling almost no change for the Fed come March, while the USD continued its flex against
DXY looks like it’s primed for breakout as EUR free falls: The market is not especially short EUR. There’s room to fall: The Australian dollar was universally panned Friday night: It alos has rooom to fall further in terms of CFTC positioning: Gold also looks primed for higher: Oil is trying. Too early for mine
A mixed day here in Asia with some stock markets following Wall Street down, some advancing particularly in China and its Australian satellite. Currency markets are equally quiet with gold almost unchanged with the major investment houses still wracking their brains over what to do with Chinese GDP expectations in the wake of the coronavirus
By Chris Becker Risk markets continue to be rattled by fear over the coronavirus with the big jump in Chinese cases sending Wall Street send slightly overnight which should provide a minor headwind to end the risk taking here in Asia going into the weekend. Euro continued its post Brexit plunge with a near three
A spike in new cases of coronavirus shook markets up a bit here in Asia today depsite the good run on Wall Street overnight. Gold and other safe havens have lifted, with Bitcoin accelerating after its recent breach above the $10K mark. The Shanghai Composite is down the most, off by 0.6% after the long
The Australian dollar shurgged off the news of the suddenly much worse COVID-19: Bonds whimpered: XJO came off a little and has a terrific set up for a mighty double-top but it looks more likely to just keep going. S&P futures are down modestly: Iron ore is, amazingly, up again. There must be some restocking
DXY is booming again as EUR crashes: The Australian dollar is strong but DXY saved its blushes: Gold is hanging but must at risk as DXY rampages: Oil caught a bid: And metals: Plus miners: And EM stocks: Having discounted zero, junk is off and running: Bonds were bashed: Stocks euphoric: Westpac has the data
The return of Japanese traders and a still upbeat Wall Street saw most Asian stock markets advance, with the major macro event being the RBNZ holding their cash rate and the New Hampshire primary in the USA. Gold is slipping while Bitcoin breached $10K again, with Yen buying moderating and helping buoy the re-opening of
Not mucking around, via Reuters: China’s aviation regulator said on Wednesday that it hopes countries will lift virus-related travel restrictions as soon as possible, in line with guidance from the World Health Organization and International Civil Aviation Organization. The Civil Aviation Administration of China will continue to lobby authorities to subsidize airlines hurt by travel
DXY softened last night after its bull run: The Australian dollar lifted on virus hopes: Gold is still hanging in there: Oil was clubbed again: But metals are trying: Miners rebounded: And EM stocks: Junk hasn’t a care in the world: Bonsd were all hosed off: As stocks managed weak gains: Westpac has the wrap:
It’s all engines ahead for risk as Chinese shares breakout, pushed along by a higher Aussie dollar and lower Yen as risk appetite comes back again here in Asia. Other safe havens like gold and Bitcoin are slipping while Japanese markets are closed for yet another holiday. The Shanghai Composite is up 0.5% after the