Aussie Dollar vs US dollar

[EstatePreneur]

Does anybody realise our Aussie dollar has gained more value against the US dollar in the last few days?

I think it's the highest since like November last year.

Could this be due to our government spending plan in infrastructure etc or is this a sign that our Aussie economy and industries are recovering? Or is it more to do with the strengthening of the regional economy/confidence especially in the Asia Pacific region?

I wonder how far up can the Aussie dollar go against the greenbacks. Anyone's got opinion?

 

[peastman]

I have been keeping an eye on it since I am off to Hawaii in 3 weeks. A friend of mine who does a lot of charting was telling me its because china is starting to buy more of Australia's resources again. I dont really understand why it dropped so much when our economy was in pretty good shape compared to the rest of the world.

 

[topcropper]

Anyone's got opinion?

I reckon the main reason our dollar is doing so well is due to the great increase in commodity prices recently. China has shown that it's not going to sit around and watch it's $US holdings devalue, and they want to buy real stuff instead. Even grain and wool is being bought, as these are easy to store and have a long life.

See ya's.

 

[Piston Broke]

The govmt spending plan is just printing more money out of nothing, thus diluting the value of the currency.
More currency generally equates to more inflation as well, as the AUD becomes worth less, it buys less. Both here & overseas.

If China wants to keep the USD high, then that will also keep the AUD low.
China's holdings have been pretty stable vs USD lately, but the have increased
considerably compared to all other currencies. I don't think they're complaining
about their buying capability with their USDs atm

What they're also doing is increasing their production of resources & agricultural products.
They got a bit to go, but how long before they can produce more & cheaper is the magic question.

 

[Sunfish]

In my "Thommo" days I predicted, on this forum, that we would get to parity with the Yanks. The near miss we have already had wasn't what I was talking about.

You can't trade the Yuan, as far as I know, so that leaves just the Pacific Peso (Was it Keating called it that when it really was on the skids?) and the Looney as the only currencies to hold for the long term. [Oh! And Au, Ag, of course] Just as long as our pollies don't stuff up too badly, the A$ will power through parity with the US$ then the Euro and possibly even reach parity with the GB Pound.

Edit: The ETS is the sort of thing which could stop us dead. Our cheap energy is our best competitive advantage. Apologies to TC. I know our primary industries do a good job too.

 

[BV]

The recent increase IMO it's due to the combination of factors.
The main ones being

1. The loss of value of the US$
2. Our interest rates being high
3. Loss of faith in the US $

Overseas investors see our $ as a safe bet because commodity prices will recover and when they do our $ will get stronger.

 

[marg4000]

It may be that the US dollar is dropping rather than ours rising.

Check against other currencies, i.e, the euro or other European and Asian currencies to get a truer picture.
Marg

 

[plusnq]

It may be that the US dollar is dropping rather than ours rising.

Check against other currencies, i.e, the euro or other European and Asian currencies to get a truer picture.
Marg

Perhaps all currencies are falling...just some sloer than others

 

[Sunfish]

Perhaps all currencies are falling...

But they can only fall relative to something else.

Normally, currencies are quoted relative to each other ie A$1 = US$0.74. If they were all to fall it could only be against something that isn't a fiat currency, such as gold.

I believe nations are involved in "competitive devaluations", in which case you should hold your wealth outside the fiat currencies. Gold producers are a compromise if you don't think you can hold the metal.

 

[chilliaa]

It has me worried, the low AU$ was providing support to the real economy.
Could the financial carry trade be picking up again (play off of yld differentials between US/Euro/Yen against AU$ with rising AU$ as icing on the cake)?
Could the double combo currency play+commodity play be picked up again by the hedge funds?

Overall i think its NOT good news for us, its moving too quickly, and you could find another case of ramp and dump, especially if the global economy, goes into an L shaped recovery.

At the moment world sharemarkets are wetting themselves with joy, that the world is not entering into another 1930's style environment, but one day they will have to focus on earnings growth. That growth has to come from the movement of trade supported by real dollars (ie people actually doing something), not borrowings from the East to spend in the West to support Export industries of the East and shopping centers in the West.

Keep a very close eye on oil prices as well. If oil really takes off, its going to kill off any grass roots recovery, and we could find ourselves in a W type recovery, this is the worst sought of recovery for financial planning.

 

[spark]

Possible explanations:

- Rising sharemerkets diverisfy holdings out of forex (thus stronger AUD) and into shares. This can reverse if sharemarkets continue their decline.

- Favourable yield difference between the AUD and other currencies, especially when the cycle of cutting interest rates is coming to its end, if not at the bottom already:
http://www.fxstreet.com/fundamental/interest-rates-table/
http://www.asx.com.au/data/trt/ib_expectation_curve_graph.pdf

- China is far from dead, and Aust commodities are needed.

- USD is losing value due to the overprinting.


In the really long term, parity with the USD, and even trading above it was the norm: http://www.wrenresearch.com.au/downloads/

 

[GreatPig]

At the moment world sharemarkets are wetting themselves with joy, that the world is not entering into another 1930's style environment

Let's just hope they're not suffering from premature congratulation!

GP

 

[WinstonWolfe]

m2cw

- USD was inflated by the GFC flight to safety. Money that exited equities and other currencies went to USD (and gold) which pushed its price up.

- With this rally, USD is losing support as funds, institutions, SWF's, govts, etc exit safety and move back to equities, commodities etc, even if to swing trade.

- China and others are supporting the USD less over the last 6-8 weeks on concerns the Obama administration will dilute its value by printing as much money as they so choose. Instead, China have ramped up investing in commodities directly (copper) and into mining companies. Below is a partial list of China's moves on Aus miners.

Minmetals on Oz Minerals
Chinalco on Rio
Hunan Valin Iron and Steel Group on Fortescue Metals Group
Shougang by stealth buying up Mount Gibson Iron Ore
Shenzhen Zhongjin Lingnan Nonfemet and PT Aneka Tambang Tbk on Herald Resources Ltd
MCC Mining on Cape Lambert Iron Ore Ltd
China Shenhua Group and China Coal Energy, Yanzhou Coal Mining on Aussie coal mines.
Haoning Group on Brockman Resources Ltd

- AUD is benefiting because we are a defacto commodity currency (compare commodities indices to AUD). There's a lot of opinion that the US has bottomed out, and everyone is expecting US and China consumers to pick up in consumption.

- There's been very little correlation between Australian domestic policy and AUD price moves during the GFC. It all comes down the global mega macro picture.

- the carry trade has picked up again.....I presume this is providing more support for the AUD though haven't seen any commentary on it.

 

[Piston Broke]

The australian money supply is no worse than anywhere else.
Infact during the boom it was more than anywhere else, thus having more in circulation dilutes the currency.
The US money supply is contracting, as the few trillion printed is nowhere near the amount of currency destroyed by the subprime crash.

Sunfish I have no problem trading USD/CNY.
Many were also predicting parity and some institutional analysis 1.25. There is no parity, and we're still a long way off. And when it comes to buying power the aus is nowhere near the usd. Speculative bubbles can always though.
present opportunities
Rates are low and bank spreads seem a little too wide for carry trading, japanese house wives are now mostly broke, freedom rockers were all washed up on the rocks, so who else is left to speculate on the carry trade?

Bottom line is the US & the USD still reigns supreme over the world financial markets and likely will for the rest of our lifetimes.
Dont forget they too want exports.

 

[Sunfish]

The australian money supply is no worse than anywhere else.
Infact during the boom it was more than anywhere else, thus having more in circulation dilutes the currency.
The US money supply is contracting, as the few trillion printed is nowhere near the amount of currency destroyed by the subprime crash.

Sunfish I have no problem trading USD/CNY.
Many were also predicting parity and some institutional analysis 1.25. There is no parity, and we're still a long way off. And when it comes to buying power the aus is nowhere near the usd. Speculative bubbles can always though.
present opportunities
Rates are low and bank spreads seem a little too wide for carry trading, japanese house wives are now mostly broke, freedom rockers were all washed up on the rocks, so who else is left to speculate on the carry trade?

Bottom line is the US & the USD still reigns supreme over the world financial markets and likely will for the rest of our lifetimes.
Dont forget they too want exports.

This is difficult to reply to. Some things I agree with, others I disagree with and others seem to be self contradictory so I'll limit my reply to this bit: Bottom line is the US & the USD still reigns supreme over the world financial markets and likely will for the rest of our lifetimes.

I suspect that I am older than you [by a couple of decades?] yet I believe that I will live to see the collapse of the USD. This is not a mere whimsical thought so could I suggest you recheck you calculations.

 

[Piston Broke]

lol it is contradictory when your talking about a currency cross, there's 2 sides to the seesaw, and both are continously moving targets.
Is one getting weaker or stronger?
Are they both strong/weak but one more than the other? etc
The aud is also a fiat currency, as is the EU, GBP and most others.
That the USD will collapse while they are the biggest commercial center and the biggest consumers is imo fantasy.
Most people, and "experts" had the USD collapsing with the subprime last sept. So what happened? What excuses this time?
The EU & UK and Australia were going to prosper according to those pulling that line. Pig's A$$ lol.
The FED has shown once again that it can slap around the rest of the world's currencies whenever it wishes to do so.
Whenever the FED speaks, the rest of the world is silent.
Make no mistake, the central bank is pulling the strings here.
I checked the numbers, and the US has the biggest by far.
And the proof is always on the exchanges:
Q. What happens on the world stock & currency markets when the US has a public holiday?
A. Nothing.

I'm not saying i like the situation, just that's what seems to be happening, and I must adjust to it if my business is trading financial markets & it's derivatives.

 

[Sunfish]

You can write 20 pages about that but you have a trader's view, I have a fundamentalist's view. Ne'er the twain shall meet.

We can't really put a bottle of Moet on whether or not the A$ reaches parity "in our lifetime!" I think we can agree that that is meaningless. How much will that bottle cost then?

So let's just agree to disagree and watch what unfolds?

 

[Shadow]

Normally, currencies are quoted relative to each other ie A$1 = US$0.74. If they were all to fall it could only be against something that isn't a fiat currency, such as gold.

I believe nations are involved in "competitive devaluations", in which case you should hold your wealth outside the fiat currencies.

Property would be a good hedge in that case. Gold might be in a bubble.

Cheers,

Shadow.

 

[Piston Broke]

Sunfish I cannot find any posts by that name. Can you pls post a link to those fundamentals your working on? thnx.

 

[boz]

this is a good read, at least of a quite probable scenario (even if I don't agree with everything as usual )