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theflasherman

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IN REPLY TO A POST BY theflasherman, Wed 14/01/04 01:49pm   [READ POST]

Nice to see the A$ coming back off a little against the US$ today. Currently sitting at 0.7757 on my screen. A bit of relief for most stocks I would think especially those in my portfolio currently!!!

IMO

 

Any pull back is only temporary. For similar reasons to the gold outlook I share with some others, i.e. bullish over the next two years, I expect the AUD to reach 0.85 by mid year. Why?

 

US does not expect to reduce budget deficit till 2008..at the earliest and it relies on the republicans holding power through the next election (with Paul Oneils comments in his book I think the Bush camp has been dealt a big blow..yet again). If the Democrats win expect spending on services to increase, taxes to increase, and the budget to blow out even further.

 

In order to reduce deficit the only policy (??) mentioned so far has been to grow the US economy so more taxes are collected from the increased GDP.

 

A rise in US rates anytime over the next twelve months will cripple their economy as consumers have re-financed mortgatges as low as they can go. The jobs are also not there and with the push to complete more free trade agreements with the south american countires even more factory and manufacturing jobs etc will be lost. In short there is no more money without the goverment printing it and priming the economy continually.

 

Now to Aus, a budget surplus thanks to tight fiscal policy, but bad social policy (it seems pretty hard to find the right balance for either party.)

 

A rate rise in the next six months very likely, as our own exposure to debt (housing and credit) continues to grow the first two rate rise have appeared to do very little to date.

 

Neutral rates by the RBA are considered to be around 5.5%

 

With the interest rate differential growing the value of the US dollar falling due the increasing supply of money and growing US debt, Aust remaining a debt free economy expect more flow of funds into the country, a continued flow of funds from the US and hence a continuing rising AUD dollar against the greenback.

 

Cheers

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US trade deficit narrowed but the A$ is remaining strong. Apparently it narrowed because of civilian aircraft sales which is a very lumpy item which probably explains the outcome.

 

However, at some point the US will become extremelly competitive from their falling dollar and will encourage manufacturing orders from overseas and hence demand for the US$. This will also encourage investment funds from overseas to buy US$s to invest there.

 

I agree that interest rate differentials are currently the biggest factor in US$ weakness and this looks likely to persist for some time. I think we could well see in excess of 0.8000 to the US$ but I don't think it is sustainable for any reasonable period.

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IN REPLY TO A POST BY theflasherman, Thu 15/01/04 04:34am   [READ POST]

US trade deficit narrowed but the A$ is remaining strong. Apparently it narrowed because of civilian aircraft sales which is a very lumpy item which probably explains the outcome.

However, at some point the US will become extremelly competitive from their falling dollar and will encourage manufacturing orders from overseas and hence demand for the US$. This will also encourage investment funds from overseas to buy US$s to invest there.

I agree that interest rate differentials are currently the biggest factor in US$ weakness and this looks likely to persist for some time. I think we could well see in excess of 0.8000 to the US$ but I don't think it is sustainable for any reasonable period.

Agree whole heartedly that a weakening US$ will likely increase export sales as US manufactured goods will be more attractive, however, export makes up less than one thrid of US GDP, in fact I think it is around 10%, but will look into further to confirm. Over 66% US of GDP comes from consumer spending within the US.

 

Even if exports do increase it does not help the tax side of the balance sheet much, the US needs their own consumers to spend, spend, spend, their whole financial system is built on it. Similar to most western economies I guess.

 

Cheers

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IN REPLY TO A POST BY pythagoras7, Tue 24/02/04 10:49pm   [READ POST]

I don't think Greenspan really wants to lift interest rates. He wants a strong economy until elections are over at least, and he CAN control the dollar, without moving interest rates, practically by the nuances in his voice.

Elections Nov 2. Perhaps appropriately, on our Melbourne Cup day.

Yes. Greenspan does have an influence based on what he says, but at the end of the day it is not just the interest rate differential driving the uS$ down.

 

The economy in the US is not as strong as certain analysts and media would like you to believe, if it was there all of the indicators GDP, Unemployment numbers, consumer confidence, etc would be going off.

 

The AUD will get to .85 by mid year (I do expect that there will be intervention at this point), the Gold price will continue to strengthen after this period of consolidation.

 

Consumers in the US are tapped out, they have re-financed morgatges and spent the money, there is none left, jobs are now needed to drive the economy so consumers have money to spend.

 

Tax cuts are not the answer, Free trae aggreements will help, especially if the US keeps screwing contries over like AUS, wasting money on Space programs will not help, nor will spending billions of dollars fighting a war no-one (but a select few) wanted.

 

Until the US govt changes leadership, to someone who actually understands basic business and not a failed business man (twice over) the US economy is destined for more trouble ahead.

 

 

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