Perhaps another IR Drop

[MTR]

Looking like another interest rate drop??

Here is an overview and how it is effecting the Au$

The Australian dollar continued to struggle on Tuesday as the prospect of an interest rate rise sooner than anticipated in the US weighed on the higher yielding currency. The AUD was near 5 year lows against the Greenback early on falling below the US77 cent handle quickly, with poor domestic and offshore figures leading the way. NAB business confidence was first up just before midday disappointing with a print of 0. The drop in confidence is believed to be underpinned by talks of a further rate cut by the RBA implying continued economic struggles. Chinese inflationary data later on had little affect just beating out forecasts while overnight the AUD continued to fall touching lows of 0.7602, before opening this morning substantially weaker at 0.7619. Today all eyes will focus on Home loans and Consumer sentiment as well as industrial production numbers out of China

MTR

 

[Richard Feynman]

It?s inevitable. April most likely. If not, May.

 

[KangaBanga]

just as the FED is expected to raise interest rates.

 

[Aaron Sice]

If (and i mean if - still only 30% likely) the US raise rates, we will see the bottom in for AUS IRs.

If they raise more than about 10bp, you can expect pressure enough on our dollar to maybe force a raise in rates here to minimise the effect of imported inflation.

If not, then expect another drop.

USD imported inflation may be curtailed by the increasing net of CFETS.

 

[rizzle]

Markets are suggesting 30% chance of a drop in April, if not a 90% chance in May: http://www.asx.com.au/data/trt/ib_expectation_curve_graph.pdf

 

[BayView]

yahoo!!!:d

 

[PaulF]

If (and i mean if - still only 30% likely) the US raise rates, we will see the bottom in for AUS IRs.

If they raise more than about 10bp, you can expect pressure enough on our dollar to maybe force a raise in rates here to minimise the effect of imported inflation.

If not, then expect another drop.

USD imported inflation may be curtailed by the increasing net of CFETS.

Agreed Aaron, it will depend on what the US does

 

[MTR]

Another low

RBA Assistant Governor Kent spoke early on about how the lower Aussie dollar will be needed to help the economy recover after the fading mining boom. He also mentioned he believed the higher yielding currency was still relatively expensive. Westpac consumer sentiment was back in the negative however was above the December lows while home loans numbers printed a similar result showing a reduction of 3.5 per cent in the change of new loans for the last month.

The Aussie was sold off across the board reaching 6 year lows bottoming out at 0.7562 before opening this morning at 0.7579. Today eyes will turn to employment data released just before midday

 

[PaulF]

Another low

RBA Assistant Governor Kent spoke early on about how the lower Aussie dollar will be needed to help the economy recover after the fading mining boom. He also mentioned he believed the higher yielding currency was still relatively expensive. Westpac consumer sentiment was back in the negative however was above the December lows while home loans numbers printed a similar result showing a reduction of 3.5 per cent in the change of new loans for the last month.

The Aussie was sold off across the board reaching 6 year lows bottoming out at 0.7562 before opening this morning at 0.7579. Today eyes will turn to employment data released just before midday

Another indication is that GS has always promoted 75 cents as a fair value for the AUD so maybe that's where the RBA will draw the line for AUD and either hold on rate cuts or even push up to control the dip in the AUD especially if the US keeps on rallying!

 

[Ausprop]

the RBA seems blind to imported inflation and is a cheer squad for a lower dollar. I wouldn't expect to see them moving to defend the dollar

 

[S1mon]

sportsbet currently paying $2.30 for a 0.25 drop in april...i put 50 on a few weeks ago at 2.50...

win win or lose lose :/

$1.57 to stay the same

 

[MTR]

Another indication is that GS has always promoted 75 cents as a fair value for the AUD so maybe that's where the RBA will draw the line for AUD and either hold on rate cuts or even push up to control the dip in the AUD especially if the US keeps on rallying!

If it breaks the 75 barrier, who knows it could go closer to 70 this year.

 

[unloadmymind]

Who cares about imported "inflation" when the world is in deflation?

Besides, other currencies are going down too. The rest of the world can sell us at lower prices and have little impact on them because their local currencies have gone down as well.

It's a USD story, full stop. The rest of the world are just like us. Depreciating against the USD.

And with weak domestic wage growth and increasing unemployment, there is no pressure on overall inflation to worry the RBA.

 

[unloadmymind]

If it breaks the 75 barrier, who knows it could go closer to 70 this year.

The AUD has been way above fair value for quite some time in the past few years.

The RBA would love to see it way below fair value for some time yet.

 

[Cassandra]

About the lower dollar: is it market forces at work or is the RBA actively selling the dollar as it did during the 90s?

 

[unloadmymind]

About the lower dollar: is it market forces at work or is the RBA actively selling the dollar as it did during the 90s?

No the RBA is not intervening in the markets at this stage. It's an expensive exercise.

It's only jawboning / using interest rate levers / signals to "manipulate" the currency.

 

[PaulF]

Who cares about imported "inflation" when the world is in deflation?

Besides, other currencies are going down too. The rest of the world can sell us at lower prices and have little impact on them because their local currencies have gone down as well.

It's a USD story, full stop. The rest of the world are just like us. Depreciating against the USD.

And with weak domestic wage growth and increasing unemployment, there is no pressure on overall inflation to worry the RBA.

I believe it's a bit more complicated than that and that we should worry about inflation. Most goods in OZ are imported and the dollar is getting weaker so less buying power for us and add on top of that, costs of holding goods in ports are rising so we will have inflation if not hyperinflation.

 

[Ausprop]

you see it at the petrol station every week... $1.30 thanks to tanking dollar, at a time when oil is in a slump. The real pain will be when retailers clear their inventories and their currency locks expire. I have been raising my prices on feebay by approx 25-30% and aus post has increased prices (again). I think aussies have grown very comfortable with high wages, low unemployment and cheap imported goods

 

[Deltaberry]

A lower AUD imports inflation because we are a net consumer society

Not good

 

[Aaron Sice]

Who cares about imported "inflation" when the world is in deflation?
.

considering most international trade is in USD - any raise in the currency's value will have massive on-flowing worldwide effects.

if the US are raising rates then their currency will be appreciating, not depreciating.

this is why i said CFETS could undo the imported inflation if it takes off strongly - affects most of the BRICS to a large degree.