DXY was up and about last night: The Australian dollar reversed down smartly: Gold was bashed: Oil is clinging to $20: Dirt sees some kind of bottom: Miners too: EM stocks fell: Junk rolled: Bonds were soft: Stocks too: The US is now being ravaged by the virus both medically and economically. Goldman sees a
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.
A volatile day for local stocks while other Asian bourses were very unsteady following the broad gains on Wall Street overnight. We’re still in bear market territory, so oscillations of this kind are not to be unexpected. USD firmed against Yen but both Kiwi and Aussie remain resilient while gold slipped a little in late
By Chris Becker Overnight risk markets took the stimulus ball and ran with it, ignoring the growing COVID-19 virus caseload and deaths, particularly in the heart of the global economic machine, the USA. Quarter and month end rebalancing may also be playing a part, but it seems like another short covering bounce as the economic
DXY was up overnight: The Australian dollar was roughly stable as the rocket flamed out: But surged against EMs: Gold yawn: Oil is worthless: Which does not bode well for dirt: Miners were OK: EM stocks too: US junk rallied. Not EM: Bonds were mixed: Stocks tacked on gains: Westpac has the wrap: Event Wrap
Outside local stocks its been another rough start to the trading week throughout Asia for risk markets, but US futures are pushing higher as the risk complex again reweights the growing pile of virus victims versus the verisimilitude of a v-shaped recovery! USD is holding its ground against the major currency pairs, although gold has
Via Goldman: …without medical breakthroughs of some kind, the next few weeks could be challenging for markets as we price in a deep global recession.”…the Dollar pulled back this week as risk assets rebounded, but our best guess is that the historic rally is not quite over. … the real trade-weighted Dollar has perhaps 3-5% upside
By Chris Becker It’s crunch time for stock markets around the world this week as its plain to see that the combined efforts of central banks and fiscal stimulus has had almost no impact on the reality that is a major recession forthcoming in 2020. As the US leads the world in its criminally negligent
The DXY flame out continued Friday night. CNY is still looking dubious: The Australian dollar tore the roof off: Gold is useless: Oil is going down, down: Dirt did better: Miners did not: Nor EM stocks: US junk flew, EM fell: Bonds were uber-bid: But stocks also flamed out: The virus is still out of
Outside local stocks its been a solid session throughout Asia for risk markets, but US futures are pulling back as all eyes are on the US Congress passing the stimulus bill. USD is losing ground against the major currency pairs, although gold remains steady, the Aussie dollar is now above 61 cents. The Shanghai Composite
By Chris Becker Stimulus packages are pumping air into the carcass that is the dead cat like a bagpipe, with Wall Street rallying on hopes that the cheques from Congress will save the next quarterly earnings bell. The fact that initial jobless claims came in at over 3 million was swept under the rug, as
DXY took a belting last night: The Australian dollar roared everywhere: Gold still couldn’t break out: Oil was crushed again: Dirt bounced a bit: Same with miners: EM stocks launched: Gimme some dat junk: Bonds were well bid: Stocks to the moon! Westpac has the wrap: Event Wrap Coronavirus update: Latest WHO data, via the
The Australian dollar is down further this morning: Bonds are well bid again: XJO is up a bit more: Big Iron is hilariously undiscounted for what’s ahead: Big Gas is better: Big Gold is crap still: Big Banks are trying but not getting far: Big Realty should be at zero because that’s where its revenue
By Chris Becker The dead cat is now in hover mode as Wall Street was unable to translate epic gains in Asia then Europe into anything substantial, with the NASDAQ actually retreating slightly despite the substantial stimulus packaged passed by Congress. While the USD retreated slightly against the majors, gold suffered a small pullback after
DXY eased again last night. CNY hit is lowest in 2020. Devaluation anyone? The Australian dollar rally flamed out across the board: Gold tried and failed again: Oil doesn’t even try any more: Dirt lifted: Miners too: And EM: Junk led: As bonds were bid: Stocks lifted modestly: Westpac has the wrap: Event Wrap Coronavirus
A sea of green across Asian stock markets today following the surge on Wall Street last night as markets mistake the absence of selling as the absence of a bear market. Gold remained above the $1600USD per ounce level while other undollar currencies advanced against USD as Congress finally passed a fiscal rescue package. The
By Chris Becker The dead cat twitched on its terminal bounce and markets are now mistaking it for signs of life as Congress finally agrees on a significant fiscal spending bill. Wall Street soared 10% higher with the USD falling slightly, alongside Treasuries while commodities were relatively unchanged, except for gold which soared another 5%
DXY was soft again last night: The Australian dollar rallied against everything: Everything rallied, actually: Except bonds: Stocks to the moon! The Fed played its part. Charlie McElligott at Nomura decribes the robot’s reaction to QE infinity: The Fed’s unprecedented “Bazooka” policy response escalation–where they are not just adding market liquidity-, short term lending- /
Everything is awesome as the whole of Asia buys buys buys! Or is it just short covering before another leg down as the US remains in deadlock, both leadership wise and fiscal stimulus, as Congress remains stalled. Gold continued its good run to put in a new weekly high while other Asian nations announce more
DXY softed a little last night: The Australian dollar firmed: Gold jumped: Oil too: Not metals: Nor miners: Or EM stocks: Junk lifted a little: As did bonds: Stocks fell anyway: Westpac has the wrap: Event Wrap Coronavirus update: Latest WHO data, via the Situation Reports, shows 292,142 cases confirmed as at 22 March, with
Groundhog day yet everyone? The ASX200 gapped over 8% lower on the open while other Asian indices oscillated wildly as the uncoordinated fiscal and monetary response to the coronavirus pandemic over the weekend has caused risk markets to have yet another epic day of volatility. Funnily enough the only sanity out there is currencies, with
All those long only equities managers calling buy the dip are being minced again today. The Australian dollar is down hard again: Bonds are bid bigly: XJO’s bath of blood is hosing everything, gapping down 8%: And the damage is still not priced. Big Iron is down: Big Oil too: And Big Gold: Big Banks
By Chris Becker Not a good time to try to time your way around these markets with Wall Street slumping again out of the blue on Friday night. Despite the record and widespread adoption of both fiscal and monetary stimulus packages around the world, equity markets are still pricing in severe recessions for the rest
Finally, some steady gains across the region, following the lead from overnight stock markets. The USD reversed course as a series of events including a big jump in projected US unemployment and proposed lockdowns in California. The RBA started their QE program today while the PBOC continues to weaken the Yuan, although offshore trading slumped
By Chris Becker Some calm returned to risk markets overnight, but its all relative, with oil shooting 20% higher on shutdown rumors from an already overly depressed level. Stocks did well in Europe and stumbled a little higher on Wall Street while in currency world, its still all about the King, as gold slumped to