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AMW: Terms of Trade & AUD
Even before last week’s sharp fall, a topical question was why isn’t the AUD stronger given the strength of commodity prices? The question is no less relevant, insofar as commodity prices, even after the falls of the past week, remain fully consistent with much higher AUD levels. It is therefore still valid to ask how far AUD could eventually rise if Australia’s terms of trade remain highly elevated and – quite conceivably – exceed their prior (2011) cycle high? Our short answer is, ‘Not that much’. We demonstrate that there were a number of forces driving AUD appreciation in 2009-2013 that went beyond ... (full story)