Australia has maintained its economy through strong trade with China as it exports commodities such as iron ore and coal to fuel China’s demand that it has generated through its stimulus package. But it could be dangerous for Australia to depend too much on China as a large part of the demand was in restocking inventories. Now Australia is trying to decide when it should take away its stimulus and how quickly it will tighten monetary policy, but I am also monitoring growth and trade with China as an important factor for future economic stability and growth in Australia.
Audusd
- Thread starter Tiger21
- Start date
Consumer prices were up more in Q3 than they were in Q2 and beat analyst estimates with a 1% advance since the last quarter vs. expectations of 0.9%. This will most likely increase pressure on central bank Governor Glenn Stevens to continue to increase rates. At the same time that prices are increasing in Australia, they are falling in other advanced economies making it more likely that other countries will not be forced to increase interest rates in the near future. I see the Aussie dollar as a good pair vs most currencies. The central bank last week reported that keeping the rate at very low levels may be imprudent. Futures show that investors are 100% certain that rates will another quarter point on Nov 3 and there is a 16% chance that rates will rise by half a percent.
Some interesting comparison points, the Australian dollar:
• is up 45% against the USD since March 2
• is the best-performing currency among the 16 most traded over the past 12 months
• reached a 14-month high against the USD on Oct 21 of 93.29 US cents
• has had 3 stretches over 90 US cents in as many years
• averaged ~70 US cents over the past decade
• reached 94.01 in November 2007
• peaked at 98.50 on July 15, 2008, the strongest since it began trading freely in 1983
RBS forecasts the currency will reach 97 US cents in the first quarter of next year. It currently is trading around 90.4. Philip Lowe, assistant governor of the Reserve Bank of Australia, warned Oct 19 that Australia “will have a higher average exchange rate” now than it has had in previous decades as a result of a high return on capital.
• is up 45% against the USD since March 2
• is the best-performing currency among the 16 most traded over the past 12 months
• reached a 14-month high against the USD on Oct 21 of 93.29 US cents
• has had 3 stretches over 90 US cents in as many years
• averaged ~70 US cents over the past decade
• reached 94.01 in November 2007
• peaked at 98.50 on July 15, 2008, the strongest since it began trading freely in 1983
RBS forecasts the currency will reach 97 US cents in the first quarter of next year. It currently is trading around 90.4. Philip Lowe, assistant governor of the Reserve Bank of Australia, warned Oct 19 that Australia “will have a higher average exchange rate” now than it has had in previous decades as a result of a high return on capital.
Goldman Sachs came out today with a report stating that investors should buy the Aussie dollar against the US dollar up to 95 US cents. They say to cover at 87.50 US cents. “With the robust GDP numbers out of the US, we think the backdrop could be supportive for risky assets in general in the short term.” The Aussie dollar was up today to 91.68 US cents.
arigoldman
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It's confusing at the moment, i'd rather stay out at this time.
