AUD/USD: Australian Dollars (AUD1=0.6679 USD) falls vs the US Dollars (USD) 17 May 2024

DAILY CURRENCY REPORT

The Australian Dollars has fallen 0.002 US cents (or 0.002%) from its last trading session of May 16, 2024 to close at 66.79 US cents, ending a three-day streak of rises.

Currency Dashboard

Trading CountryAUD: AustraliaTrading CountryUSD: United States Of America
17 May, Close AUD/USD 0.667916 May, Close USD/AUD 1.4975
1-day change (%)AUD down 0.0022%1-day change (%)USD up 0.2162%
YTD change (%)AUD down 2.2279%YTD change (%)USD up 1.5723%
Relative Strength (6 mo)62.5Relative Strength (6 mo)19.5

+ The AUD is up 1.0% against the USD in the past week.

+ The exchange rate ranged between a low of 0.6596 on Monday, May 13 and a high of 0.6679 on Friday, May 17.

DayAustralian DollarsClose (USD)Change %Comment
FridayFalls vs the US Dollars (USD)0.66790Week-high of 0.6679
ThursdayRises in 4 out of last 5 days vs the US Dollars (USD)0.66790.5Rises for a third consecutive day
WednesdayIncreases 0.7% vs the US Dollars (USD)0.66470.7Top Rise
TuesdayIncreases vs the US Dollars (USD)0.660.1Price/MAP50 above 1
MondayFalls vs the US Dollars (USD)0.6596-0.2Week-low of 0.6596 Steepest Fall

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SECTION 1 Business News Round up

1.1 Recent Business News Round up: CNBC

1.2 Press Releases

August 19 2023: The health of China's economy could determine whether a recession is on the cards in Australia

The Australian dollar has fallen from 68.8 US cents on June 15 to 64 US cents this week.

That's a drop of roughly 7 per cent - a significant drop for any currency, but especially the Australian dollar.

The benchmark stock exchange index has also fallen 6 per cent from its all-time high.

Every time a currency trader or a share investor buys or sells, there's a reason behind it - and the millions of decisions made every day by investors tell a story.

The story forming now is one of worry.

Concerns over the health of China's economy are towards the top of the worry list, but there's also anxiety around how, exactly, the interest rate hikes announced by the Reserve Bank will ultimately affect the economy.

So, what's going on, and who's in the firing line? Australian dollar tumbles

The Australian dollar's fall over the past fortnight is a direct reflection of growing jitters about the global economy and financial markets.

Primarily, these concerns centre around the health of the world's second-largest economy, China.

The official data makes for ugly reading.

New construction starts (or new buildings) fell 24.5 per cent in the first seven months of the year.

Property prices in some areas have "crashed", down by 25 per cent from their October 2021 highs.

Prices are falling as demand slides, and that's weighed against enormous levels of debt held by property developers and asset managers.

Asset manager Zhongzi and property developers Country Garden and Evergrande are all showing signs of financial stress.

Evergrande actually filed for Chapter 15 Bankruptcy in New York on Friday, a move to protect its US assets while it seeks to negotiate with its creditors.

And in another move to stabilise its economy, China's central bank intervened on Friday to support the local currency, the Yuan.

"China's central bank allows the yuan to trade +/-2 per cent each day either side of its fixing rate," Westpac senior currency strategist Sean Callow told The Drum.

"But rather than the fixing rate being yesterday's close, adjusted for USD movement in New York trade, the PBOC [People's Bank of China] sometimes pushes it in its preferred direction.

"So today if you want to sell the yuan, you won't get very far before a central bank with $3.2 trillion in reserves stops you."

China's economic defences are up.

With the Chinese economy looking the weakest it's been since COVID, including slipping into deflation, and as global investors hoover up the US dollar, the Australian dollar has lost favour.

"The Aussie is groaning under the weight of high US interest rates, investor angst over China's fragile property market and the RBA's contentment on inflation," Callow said.

"It is in danger of sliding to 0.62, last seen in October 2022 when China doubled down on zero-COVID and US 10-year yields were around 4.30 per cent, as they are now." And what about the ASX?

Alongside all of this drama, Australian stocks have taken a fair bit of punishment this week.

While the National Australia Bank, Origin Energy and Telstra have all produced robust profits in the annual reporting season, the technology sector has seen significant falls.

Technology companies are particularly prone to movements in interest rates because of the debt they take on to grow.

The consensus in the market is that while interest rate rises may be nearing an end, rates are likely to stay higher for longer.

"The stock market is also reacting to the prospect of higher for longer interest rates that will most likely impact earnings," Jamieson Coote Bonds executive director Angus Coote said.

"You also have a 10-year government bond yielding 4.25 per cent.

"It's becoming hard to justify riskier equities when you get paid so much for high-quality sovereign bonds that have no underlying credit risk."

What Coote's saying is that it's safer - for want of a better word - to make a buck on bonds now as interest rates stay elevated, prompting many to sell shares in favour of buying debt securities.

There's a genuine move in global financial markets to seek out the safety of higher ground, or to gain financially from rising interest rates.

August 05 2023: What the fall in the Australian dollar tells us about the future of interest rate rises

There's growing evidence the economy is under stress.

The Bureau of Statistics this week reported that retail trade volumes fell by 0.5 per cent in the June quarter.

It's the third consecutive quarterly decline.

Volumes are now 1.4 per cent lower than a year ago, the weakest annual figure in the series' history outside of the pandemic.

"The challenging times for retailers have just begun," the Commonwealth Bank of Australia noted.

"Challenging times require retailers to trim expenses, firmly control inventories and lift marketing to get a greater share of the consumer wallet.

"The Reserve Bank will hope that more retailers cut or control prices to lift sales."

Based on this sort of analysis, the Reserve Bank's mission to bring inflation down to its target range of between 2 and 3 per cent is on track. RBA governor Philip Lowe's prized "narrow path" for the economy may be achieved.

But how confident of this can we be?

Movements in the Australian dollar give us some clues.

First, though, we need to look at inflation. What's going on with inflation?

Among the very big issues Australia is wrestling with is the cost of living, or inflation.

Millions of Australians want to know when that sinking feeling they endure at the check-out will cease.

Treasurer Jim Chalmers has commented more times than I care to remember that it will stay higher than we would like for longer than we would like.

So why is he saying that when evidence points to this bout of inflation being a global problem, and there are signs that it is easing?

Indeed, alarming levels of inflation began emerging in the US in 2021 and the country's annual inflation rate returned to 3 per cent in June.

Australia's Reserve Bank would be comfortable with that pace of inflation.

But it's going to take a considerable amount of time for the very gradual process of disinflation - the rate of inflation falling - to roll towards a level that the Reserve Bank wants.

The Reserve Bank's big Statement on Monetary Policy, published Friday, shows core or underlying inflation returning to 2.9 per cent by June 2025.

However, the bank is also forecasting a lot of the heat to come off price rises by the end of this year.

This is consistent with what the bank has always argued; raising interest rates would reduce the demand-driven inflation in the economy, and the supply side would resolve itself.

This is entirely possible when it comes to gas and electricity prices and petrol, but is less certain when you look at things like rent, out-of-pocket health care costs and insurance premiums. More certainty around the economy?

It may be that an economy limping along - not going backwards - is enough to stop price hikes in these areas of the economy.

The Reserve Bank's latest forecasts show the unemployment rate rising to 4.5 per cent by the middle of 2025.

Depending on which economist you speak to, that's roughly 140,000 jobs lost over the next 24 months.

It's consistent with what soon-to-be RBA governor Michele Bullock said a few weeks back - that unemployment would "have to" rise for inflation to come down to the RBA's target band.

With wage growth still subdued - and well over 100,000 extra people in Centrelink queues - it makes sense that businesses would be forced, quite literally, to absorb the supply-side inflation in the economy.

This also creates another problem: an increase in business insolvencies, which leads to further redundancies. How the Australian dollar is reacting

The Australian dollar saw out July at above 67 US cents. This week it's fallen to as low as 65.2 US cents.

That's an unusually sharp move down for the Australian dollar.

Part of the reason for this is that the 10-year US Treasury bond yield hit its highest point in 2023.

And for good reason.

The US Treasury Department announced this week it plans to sell $US103 billion ($158 billion) of long-term debt next week.

That's more than was previously estimated.

As bonds are sold, their prices fall and interest rates rise.

They become more of an attractive investment for international investors.

Those investors sell their Australian dollar-denominated assets and buy US dollar-denominated assets.

Crucially, these big money movers are unlikely to do this on a consistent basis unless they saw this trade being attractive for some time.

Several leading economists told The Drum the financial markets - including the currency market - are sending a clear signal about their view of the future direction of interest rates in this country.

"The [Australian dollar] fall reflects a combination of market expectations that the RBA may have finished hiking [interest rates] and uncertainty following the Fitch downgrade to the US [credit rating] which may increase pressure for fiscal austerity which could threaten the global growth outlook and hence cyclical currencies like the Australian dollar," AMP chief economist Shane Oliver said.

That slower world growth would also lessen the chance of any further interest rate hikes because it would subdue Australian economic growth.

Meanwhile, former Treasury economist Warren Hogan noted that the view on the direction of Australia's monetary policy had changed "substantially" this week.

"The Australian dollar is reacting to market interest rates, which have declined substantially in recent weeks and reflect an expectation that the RBA is likely at the end of its tightening cycle," he said.

"With a less than 50 per cent probability of another rate hike now, with [interest] rate cuts priced [in] for the second half of 2024, it is fair to say the Australian dollar is reacting to the prospect of 4.1 per cent being the peak cash rate for Australia.

"Given this is [1.4 per cent] below the US Federal Funds Rate, the currency will remain under pressure and could fall substantially if commodity prices start to fall."

And economist Diana Mousina sees the end nearing for interest rate hikes, but also notes that the overall sentiment in financial markets has soured recently.

[There's] only about a 20-25 per cent chance of another 0.25 percentage point interest hike out to November," she said.

"But [the] lower Australian dollar is also [reflective of a] risk-off sentiment this week."

Clear signals on interest rates

Financial markets don't mess about.

SECTION 2 Ongoing Bearish Parameters

2.1 Annualised Period-based Total Shareholder Returns [TSR %]: The Worst Periods with TSR < -0.6%

TSR %3 yrs5 yrs
AUD.CURR-4.7-0.7

2.2 Present Value of $1000 Invested in the Past [1 Yr, 3 Yrs]; The Worst Periods with PV$1000 < 998

PV$1,0001 yr ago3 yrs ago
AUD/USDUSD997$864

2.3 Past 3 years: price fall of 13.6%

Change %3 Years
AUD/USD-13.6

SECTION 3 Today's Bullish Signals

3.1 Uptrend of AUD vs USD

Positive MACD:

- The Moving Average Convergence Divergence (MACD) indicator of 12-day Exponential Moving Average (EMA) of 0.66 minus the 26-day EMA of 0.66 is positive, suggesting a bullish signal.

Past Month:

- Rises to Falls: In the past month the number of rises outnumbered falls 14:9 or 1.6:1.

Past Quarter:

The Best 3 weeks in the past quarter:

In the past quarter the top rise of 2.0% took place in the week beginning Monday March 04.

Mon-FriChange %
Mar 04-082
Apr 22-261.9
Apr 29-May 030.7

SECTION 4 Ongoing Bullish Parameters

4.1 Rank in the top 17% in the Currency Pairs market

DescriptionValueRank
1-month Price Change %3.1In Top 9%
Price/MAP501.02In Top 13%
1-week Price Change %1.0In Top 17%

4.2 Present Value of $1000 Invested in the Past 3 Months; The Best Period with PV$1000 > 1,021

PV$1,0003 mo ago
AUD/USD$1,022

4.3 The Best Periods [3 Mo, 1 Yr] with Change % > 0.2

Change %QuarterYear
AUD/USD2.20.3

SECTION 5 Currency Crossrates

Currency Crossrates Today's Snapshot for AUD

AUD1=11.1467MXNMexicoFalls for a second consecutive day, a two-day fall of 0.4% vs the Mexican Peso (MXN)
AUD1=904.0477KRWSouth KoreaIncreases 0.5% vs the South-Korean Won (KRW)
AUD1=7.145NOKNorwayIncreases vs the Norwegian Kroner (NOK)
AUD1=0.8981SGDSingaporeRises for a fourth consecutive day, a four-day rise of 0.5% vs the Singapore Dollars (SGD)
AUD1=7.1539SEKSwedenIncreases vs the Swedish Krona (SEK)
AUD1=103.9328JPYJapanIncreases 0.9% vs the Japanese Yen (JPY)
AUD1=0.6142EUREuropean UnionIncreases vs the Euro (EUR)
AUD1=0.9088CADCanadaFalls vs the Canadian Dollars (CAD)
AUD1=4.8184CNYChinaFalls vs the Chinese Yuan Renminbi (CNY)
AUD1=0.5269GBPUnited KingdomIncreases vs the British Pound (GBP)
AUD1=5.2041HKDHong KongFalls vs the Hong Kong Dollars (HKD)
AUD1=0.6679USDUnited States Of AmericaFalls vs the US Dollars (USD)
AUD1=1.0904NZDNew ZealandFalls for a fourth consecutive day, a four-day fall of 0.7% vs the New Zealand Dollars (NZD)
AUD1=0.605CHFSwitzerlandIncreases 0.5% vs the Swiss Franc (CHF)

SECTION 6 Period-Based % Change

% Change of AUD vs Currency Basket Period-Based

In the past three years the Australian Dollar fell 13.6% against the US Dollar. However, in the past year the Australian Dollar rose 0.3% against the US Dollar.

LastCountry1-day %1-week %1-Year %3-Yrs %
AUD1=0.668USDUnited States Of America-1.00.3-13.6
AUD1=4.818CNYChina-0.93.7-3.4
AUD1=103.933JPYJapan0.91.114.422.9
AUD1=0.614EUREuropean Union-0.10.3-4.0
AUD1=904.048KRWSouth Korea0.5-1.73.8
AUD1=0.898SGDSingapore0.10.40.8-12.8
AUD1=1.09NZDNew Zealand-0.1-0.62.41.4
AUD1=0.527GBPUnited Kingdom0.1-0.2-1.1-4.2
AUD1=5.204HKDHong Kong-0.20.8--13.3
AUD1=0.605CHFSwitzerland0.51.01.6-13.6
AUD1=0.909CADCanada-0.10.51.5-3.3
AUD1=7.154SEKSweden0.4-0.33.410.1
AUD1=7.145NOKNorway0.2-0.30.210.7
AUD1=11.147MXNMexico-0.20.4-4.0-27.7

SECTION 7 Currency AUD vs USD

Year-on-Year Comparison AUD/USD (Trailing year - ended 17 May)

In the past 5 years, the USD has appreciated against the AUD at an average compound annual growth rate of 0.6%.

202420232022202120202019
Close0.670.670.70.780.650.69
% Change0.3-4.5-10.420.6-6.2
Range0.68 - 0.680.66 - 0.660.75 - 0.75

AUD1 buys USD 0.67 today: Appreciation of USD from 0.72 v/s AUD thirty years ago

Last5 Yrs ago15 Yrs ago20 Yrs ago25 Yrs ago30 Yrs ago
AUD/USD0.670.690.760.690.670.72

Present Value of $1000 Invested in AUD 30 years ago is $923

PV$1,0005 yrs ago20 yrs ago30 yrs ago
AUD/USD$966$971$923

SECTION 8 Macroeconomic Indicators

INDICATORAUSTRALIA[AUD]UNITED STATES[USD]
GDP (Billion USD)1,6930
GDP YoY (%)-25,440
Interest rate (%)3.63.4
Inflation rate (%)3.83.9
Unemployment rate (%)-1.4-5.8
Budget / (Deficit) to GDP ratio (%)22.3-
Current account / (Deficit) to GDP ratio (%)26.2721.0
Debt to GDP ratio (%)1.8335.89

SECTION 9 Credit Rating Summary: UNITED STATES

Rating AgencyLong TermForeign CurrencyDescription
MOODYAaa
S&PAA+Very strong capacity to meet financial commitments. The plus (+) sign shows relative standing within the major rating category.
FITCHAAA Highest credit quality: 'AAA' ratings denote the lowest expectation of default risk. This capacity is highly unlikely to be adversely affected by foreseeable events.
DAGONGA-High Credit Quality: "A" ratings denote expectations of relatively low default risk. The capacity for payment of financial commitments is considered sufficient. However, this capacity may be more vulnerable than those of the higher ratings to adverse business or economic conditions due to any foreseeable event. The minus (-) sign shows relative standing within the major rating category.

AUSTRALIA

Rating AgencyLong TermForeign CurrencyDescription
Moody'sAaa
S&PAAAExtremely strong capacity to meet financial commitments. Highest Rating.
FITCHAAAHighest credit quality: 'AAA' ratings denote the lowest expectation of default risk. This capacity is highly unlikely to be adversely affected by foreseeable events.
DAGONGAA+"AA" ratings denote expectations of very low default risk. It indicates that the issuer has a very strong capacity for payment of financial commitments. Although due to its relatively higher long-term risk, this capacity is not significantly vulnerable to any foreseeable event. The plus (+) sign shows relative standing within the major rating category.

Source: www.BuySellSignals.com