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AUD, Australian Dollar Discussion
mullokintyre
post Posted: Aug 7 2018, 08:10 PM
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In Reply To: mullokintyre's post @ Aug 6 2018, 09:48 PM

So, one of the three reasons gains strength as the RBA holds rates at current levels.
And what does the AUD vs USd do?
Its up by 67 basis points.
Makes so much sense.
Mick




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mullokintyre
post Posted: Aug 6 2018, 09:48 PM
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QUOTE
Optimism that Australia’s dollar has found a bottom may be premature.

The currency looks set to take another leg down as the U.S.-China trade war worsens and the outlook deteriorates for Australia’s major export earner iron ore. At the same time, the central bank is predicted to reaffirm its commitment to keeping interest rates at a record low when it meets this week.

While the Aussie is already the worst-performing major currency this year after Sweden’s krona, here are three reasons why it may still be one of the juiciest shorts in foreign-exchange markets.


1. Casualty of War

The impact of deteriorating U.S.-China trade relations is poised to ripple around the world and one of the biggest victims will probably be Australia, as the Asian nation is its largest trading partner. The Aussie tumbled as much as 1.4 percent on June 14 when U.S. President Donald Trump said he would confront China “very strongly” over trade and was about to release a list of tariff targets.

2. Iron Shackles

Although iron-ore prices have climbed about 6 percent from this year’s low to trade around $66 a metric ton, they are only only half the level seen in early 2014. The Department of Industry, Innovation and Science last month slashed its forecasts for the commodity, predicting it will drop to $51.10 next year as China starts to dial back purchases.

The technical outlook for iron ore is also becoming bearish. The resource is approaching its 200 day-moving average for the first time since March, and recent history has shown it frequently falls back after nearing that level.

3. Diverging Rates

The Reserve Bank of Australia is forecast on Tuesday to keep its cash rate target at a record low 1.5 percent, where it’s been for about two years, as it endeavors to breathe life into the nation’s sluggish economy. The Federal Reserve in contrast has raised its benchmark seven times since December 2015 and said last week it remains committed to further tightening.

Australia’s 10-year bond yields dropped to more than 30 basis points below their U.S. peers at the end of July and the divergence is expected to keep widening. Markets are anticipating the RBA will stay on hold well into 2019, while the Fed is expected to raise rates another two times this year.


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All three are plausible, but have no time frame, nor any probabilities of them compounding.
Mick




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blacksheep
post Posted: Jul 25 2018, 03:41 PM
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Short the Aussie as Worst Is Yet to Come, Top Forecaster Says
By Ruth Carson and Y-Sing Liau
July 25, 2018, 6:00 AM GMT+10
QUOTE
Aussie will slide to 76.50 yen if trade war worsens, CIMB says
Speculative bets against Aussie climb to highest since 2016

https://www.bloomberg.com/news/articles/201...forecaster-says



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mullokintyre
post Posted: Jun 28 2018, 09:26 AM
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In Reply To: mullokintyre's post @ Jun 21 2018, 07:57 PM

On the ABC financial report last night, Alan Kohler remarked that the smaller banks have started to increase their mortgage rates (admittedly by very small amounts) in response to an increase cost in obtaining funds. His final comments was "how long until this flows through to the larger banks".
Looks like the next phase is onwards and upwards.
Mick



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Mags
post Posted: Jun 22 2018, 08:58 AM
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100% agree: At some stage fundamentals will completely over-ride any power the RBA has.

We already see the spread between RBA rate and retail rates being the largest that I'm ever aware of.

 
mullokintyre
post Posted: Jun 21 2018, 07:57 PM
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In Reply To: lgrif's post @ Jun 21 2018, 05:48 PM

I have a feeling that it will be taken out of the hands of the RBA.
Australia is very dependent upon external sources for capital.
We are a nation of spenders, and rely on the nations of savers to provide a constant and growing supply of capital.
If those external sources decide that Australia is becoming riskier - say they start to lose faith in our banks, or there is some sort of political lunacy in the senate,
or the market for our meagre products goes sour (overseas students decide its not such a great place to study, or they don't want our wheat, cotton, iron ore or wool),
then the providers will want a higher risk premium.
If it costs the banks more to source capital, it will of course be passed on to its customers (with a hefty extra premium for themselves).
The RBA will be powerless to prevent it.

Mick



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lgrif
post Posted: Jun 21 2018, 05:48 PM
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In Reply To: early birds's post @ Jun 21 2018, 04:41 PM

2 - 3 months time lag, for RBA to act & some say A$ will go as low as US 69c. But my thoughts are similar to yours & I suspect that around 71-72c the RBA will try to talk the A$ up for a month or two..
Problem is my currency predictions history (esp. the timing) are average at best.
Wrong chat site, but gold down way below support. Have read it could now go down to the low US$1000 +; US$ currently a safe haven, but not gold . Anyone got an opinion on what could trigger gold coming into favour (wars excepted). In particular, inflation a + for gold price, but inflation generally increases interest rates, which is a negative



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early birds
post Posted: Jun 21 2018, 04:41 PM
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aod is at 73.50 cps as i type .
if it keeps drop at current rate then this event will jack up aussie's inflation, because we import most of daily things from not only china and s korea , japs eg......

a higher inflation will trigger RBA rate hike right??

72 cps handle isn't that far off..

 
Mags
post Posted: May 19 2018, 11:11 AM
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In Reply To: mullokintyre's post @ May 19 2018, 09:15 AM

Yes, I agree, there's either nasty drops coming to our dollar or the RBA starts hiking, at the expense of small business and mortgage holders.

My mate follows this area heavily, and Australia is a capital importing country. We need foreign capital to operate. Just consider how much of the ASX, the property and ag sector are foreign owned... It's immense.

To attract that investment and capital, our rates traditionally are significantly higher than USA, the benchmark, being the world currency.

Now the reason to send cash to Australia is deminishing... What will the risk profile do if we have a change of federal government? For the first time in a long time, we do NOT have a METOO opposition, the opposition stance on personal tax cuts, -ge gearing, and business tax cuts are very, very different from the current bunch.

It's an interesting time to be alive, and I'm sure in years to come, many lessons from the last 10 years will be learnt.

With terrible private debt, three unaligned levels of government, a banking sector being exposed as thieves, unstable business and employment environments, it's hard to argue that Australia isn't horribly exposed to any shock that will trigger economic chaos.


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mullokintyre
post Posted: May 19 2018, 09:15 AM
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Chuck Butler, in his inimitable style, pointed out that the yield spread between Oz 10 year bonds and the US 10 year bonds is no more..
QUOTE
The Aussie dollar (A$) is also getting whacked, as traders have taken the position that the Reserve Bank of Australia (RBA) isn't going to hike rates any time soon, and with the U.S. Fed hiking rates, the spread between the A$ and U.S. dollar will widen... I noticed something the other day that caught my eye, and I was taken aback that I hadn't notice this before... But the positive yield spread in the 10 Gov't. Bonds that Australia had held over the U.S. since 2000, is gone.. no more, and like Puff the Magic Dragon, Aussie 10-year Gov't Bonds have cease their fearless roar...

And to me, as an old bond trader, yield spread between countries is a Big Deal.. Well, it was back in the 90's when I traded foreign bonds. And apparently it is still today, as the A$ is losing ground to the U.S. dollar, and while rate hikes in Australia may be evident they aren't imminent with the RBA, and therefore the yield spread between the two countries will only grow wider, to the dollar's advantage...


It will take something pretty good to reverse the general downward trend of the AUD.
Transient things like a weaker than expected retail sales figure in the US, or stronger than expected PMI figures will give short quick reversals in either direction, but the general trend is down.

Mick



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