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.

227

Macro Afternoon

Stocks markets are mixed across the region despite the falls on Wall Street and in Europe overnight, as concerns over COVID (at least on the continent, not the colonists) outweigh risk sentiment. There’s been a continued retreat to safe havens like USD, Yen and gold – and Bitcoin – with the non-useless shiny metal slowly

3

Macro Morning

A flurry of potentially good economic releases did not stave the risk off mood overnight as the chance of any stimulus this side of the US election closed out as the Senate was put out to pasture by the Republicans. A solid September durable goods orders and equally fixed consumer confidence print had little impact

50

Australian dollar deer in virus headlights

Everything is levitating in vain hope that the virus will just go away. DXY: The Australian dollar: Gold: Oil: Metals: Except for miners: EM stocks are floating: Junk too: But Treasuries have puked the steepening trade: Stocks are diving in Europe and have a terrifying double top chart in the US: Data from Westpac: Event

205

Macro Afternoon

Stocks markets are falling across the region in response to the big stumble on Wall Street and in Europe overnight, with a retreat to safe havens like Yen and gold, the latter inching back above the $1900USD per ounce level but still looking weak here as its medium term uptrend remains under threat: The Shanghai

8

Macro Morning

Its risk off as Wall Street and European stocks took a tumble, started first by an underwhelming IFO survey in Germany followed by continued outbreaks and new record high cases of COVID-19 in the US and Europe alike. Stalemate over further fiscal stimulus in the US didn’t help confidence, with stocks falling over 2% although

203

Macro Afternoon

Risk markets are stumbling on the open to the trading week here in Asia with most stock markets in retreat with gold flopping below the $1900USD per ounce level after its midweek rally previously fails to find any momentum with the medium term uptrend now under threat: The Shanghai Composite is losing fast, down another

4

CS: RBA QE priced into AUD

Via Credit Suisse: With rate cuts and QE expansion now well priced in for the 3 Nov RBA meeting, we see reduced potential for idiosyncratic AUD weakness going forward. We leave our pre-election AUDUSD target unchanged at 0.70. In the aftermath of US elections, we expect AUD price action to follow developments in risky assets

4

Macro Morning

Wall Street had a mild finish to the week with European stocks outperforming. The impasse on US stimulus talks this close to the election is holding up risk sentiment, with the USD retreating slightly and bond yields slightly lower. Commodity markets pulled back even further with oil slumping alongside copper and iron ore, while gold

186

Macro Afternoon

Risk sentiment is mixed today here in Asia following the final US presidential debate as the majors are battling it out against the USD with gold hovering just above the $1900USD per ounce level as momentum reverts from its overbought condition and Bitcoin slips from its mammoth $13000 top: The Shanghai Composite is slowly putting

9

Macro Morning

Wall Street was able to find some confidence overnight even though there was still no progress on fiscal stimulus measures. European stocks were flat at best while the USD returned to strength, mainly due to the fall in Euro. Commodities were again mixed with oil coming back while copper fell alongside gold, while Bitcoin shoots

26

Australian dollar holds as virus runs amok

DXY was up last night: The Australian dollar was roughly flat: Gold fell: Oil rose: Metals fell: Miners were mixed: EMs stocks stalled: Junk too: US yields backed up some more: Stocks firmed: Wesptac has the wrap: Event Wrap US September home sales surged 9.4% to an annualised 6.54m homes (est. 6.30m) on the back of record low

174

Macro Afternoon

Risk sentiment is trending down again today here in Asia following the repeated unease on Wall Street overnight, going into the last US presidential “debate”. The USD remains firmly down against the majors with Yen still quite firm while the Australian dollar consolidates above the 71 level. Gold is trying to regain its lost ground

2

Macro Morning

Risk sentiment remains tenuous across the North Atlantic overnight with Wall Street stumbling and European stocks almost in full retreat as the triple whammy of COVID, Brexit and the upcoming US elections weigh on markets. USD is falling sharply against the majors, with both gold and Bitcoin taking advantage, while commodity prices are completely messed

125

Macro Afternoon

Risk sentiment is generally solid today here in Asia with mainland Chinese shares the only fly in the ointment as Yuan contineus to advance.  The USD is mixed against the majors with Euro spiking, Yen firming and the Australian dollar trying to clawback it start of week gains. This is good news for gold bugs

2

Can a digital EUR challenge USD reserve?

Corss-posted from FTAlphaville: A European Central Bank research paper on the feasibility of the digital euro has garnered a lot of attention over the past couple of weeks. It would, as the FT’s Martin Sandbu writes here, appear as though the writing is on the wall and the eurozone will launch its own central bank-backed digital currency in

3

Macro Morning

With less than two weeks to go until the US elections, risk markets are still swayed by any hopium around a further stimulus package from Congress, with further talks overnight pushing markets and then post-close futures this morning. Wall Street notionally closed higher but has slumped again this morning. Commodities have lifted however on the

143

Macro Afternoon

Risk sentiment is very wobbly today here in Asia with Chinese shares just holding on to scratch sessions while the rest of the region sells off slightly in response to the harsher falls on Wall Street overnight. The USD is mixed against most of the majors although the Australian dollar remains on the ropes with

7

Reinvented RBA whacks Australian dollar again

Finally, ten years late, we are in the global monetary and currency game: The Stance of Monetary Policy in a World of Numerous Tools Christopher Kent[*] Assistant Governor (Financial Markets) Address to the IFR Australia DCM Roundtable Webinar Online – 20 October 2020 Introduction In a world of unconventional policies, assessing the stance of monetary policy is

2

Macro Morning

The lack of any economic reports and any action of further stimulus measures from the US sent Wall Street and other risk markets lower overnight, as we head into the usually volatile late October period leading up to the US presidential election. Commodities were mixed with oil pulling back slightly while gold and Bitcoin both

108

Macro Afternoon

As the trading week starts again, risk sentiment has finally found some support outside China, which had to absorb the latest declining GDP print. The USD is mixed against most of the majors with gold getting back above the $1900USD per ounce level as daily support very slowly builds: The Shanghai Composite however continues to

34

RBA has indeed joined the global currency war and thank god for it

Back in 2016, Australian economics titan, Tim Toohey, forecast a new Australian boom: Goldman Sachs has upgraded its Australian dollar and economic growth forecasts. “As we look out to 2017 and beyond, we believe Australia has moved through an important transition point and with it has emerged the prospect of stronger and less volatile real

25

Beware Australian dollar as Europe enters second virus shock

Via the FT: Europe’s economy is sliding towards a double-dip recession, with economists warning that rising coronavirus infections and fresh government restrictions on people’s movement are likely to cut short the region’s recent recovery. Germany, France, the UK, Italy, Spain and the Netherlands have all announced measures in the past week to contain the second