Aussie dollar plunge tipped

Aussie dollar plunge tipped
Chris Zappone
February 25, 2009 - 12:01PM

The fall in commodities prices that has sapped stock values and exacerbated the nation economic slowdown, may soon push the Aussie dollar to 58 US cents, according to an analyst.
Australian dollar could fall to 58 US cents soon, analyst says

 

Anyone buying US currency?
Since my portfolio got smashed I wonder if I should sell them and just buy US$.

PS: I am not sure if I am being rational. It's been a tough 12 months as far as investment concern.

 

Well a cheaper dollar doesn't hurt us too much, it may actually help to alleviate some of the pain and give other industries (other than commodities) the ability to start exporting more, especially to our other big trading partners the US and Japan whose currencies have strengthened significnatly of late.

In the article, the above was mentioned. Is anyone else getting really sick and tired of hearing how government, central banks, and world economic institutions are always "revising down" their estimates? I mean how many times do these guys have to over estimate before the public wises up and say "I think these guys are clueless or full of BS"?

Clearly one of two things is happening. Either they are always over stating their estimates for fear of creating a self fulfilling prophecy, or their models that they have been using for the last 40 - 50 years to predict and regulate economic activity are flawed and economists need to let go of neoclassical and keynesian economics models and start viewing the world through the eyes of Austrian school analysis, which is vastly more applicable in this situation.

I don't think the appreciation of the USD$ of late is a reflection of its quality, rather it's a reflection of how bad everything else is.

Personally, I'm very bearish on the USD, and the reason is simple - they have over $10T in national debt, they are running massive budget deficits, and have no intention of stopping anytime soon (hell they think it's will be a MASSIVE achievement if Obama can get it back to a $500B budget deficit in his final year)! But more important than all of that, if you look at the USD monetary base, the FED has DOUBLED it in the last 4 months alone!

That said in the short term (as in a few weeks/couple of months) the USD might not be a bad bet, but in the longer term (as in a few years) I think the USD is doomed to fail.

I've been in gold for the last few months and have made great returns. It's actually been recently smashed back down to $950/oz (it was over $1000) so I'm actually going to buy more either today or tomorrow. I personally think it is a much better hedge against depreciating currency, but that is just my two cents.

 

Yes....I am buying and selling.
Interesting article is here ....http://www.bu.edu/econ/seminars/macroeconomics/paperfall06/csv_currency_060911.pdf

 

Trading is subtly different from the old buy and hold strategy... and I'm not sure if Tropic is looking to become a FX trader (mainly because he is looking minimise his losses )



Just out of sake of interest, Tropo, do you have any exposure to gold at the moment? If you don't mind me asking.

 

"Trading is subtly different from the old buy and hold strategy... and I'm not sure if Tropic is looking to become a FX trader (mainly because he is looking minimise his losses )"

Padre....don’t you think that Tropic can speak for himself ??

"Just out of sake of interest, Tropo, do you have any exposure to gold at the moment? If you don't mind me asking."

No, I don’t mind! So...what do you think?

 

I really don't know what I should do. I am staying put at the moment, trying not to dig a deeper hole.
Put it this way, I used to be 40% geared on shares, now 100% (the portfolio dropped 60%+). Is no longer a comfortable territory since I can actually lose the principal. It actually has a reasonable change of happening.
I watched a Dateline show about a week ago. The presenter (George?) asked Tony Blair if Gordon Brown is facing a massive challenge?
He (Mr Blair) said British is facing "intellectual" challenges. Usually when they have problems they gather their experts and come up with a solution and implement it. If it doesn't work and they do plan B.
Now the experts don't know the solution to the crisis.
They need plans A, B ... Z.

Anyway this is outside the AUD$ topic.

 

Why take the risk?
US is not the most stable economy atm.

I am actually surprised China is still backing the US$.
I guess they must have huge stockpiles of the greenbuck.

I think there is a chance that things will improve in the near future and the AUD could easily go the other way.

Our interest rates are also considerably higher than those of other western countries so as long as the interest rate gap is preserved and commodity prices don't fall further it will be hard for our $ to lose much ground.

IMHO

 

Tropik

If you cannot control your share portfolio what makes you think that you’ll be able to control foreign currency (US$)?

 

Keep learning as much as you can about the crisis and how we got here, what's going one, what the likely progressions of the crisis will be, etc etc. Just keep doing that until you have gathered enough confidence in your knowledge to make a decision. That's pretty much all you can do.

I think a lot of experts know in their heart of hearts what the answer is and the likely result of this crisis.

Unfortunately most developed countries spent the last 4 decades partying like it was 1999, and now that the party is over the hang over is kicking in, but governments are trying to prevent the full blown hangover by slamming another couple of beers down in a futile attempt to dodge the pain but they are only prolonging the inevitable.

 

I didn't know if you did or didn't, thus the reason I asked. I think your a pretty switched on guy, so I reckon you will have at least small exposure to gold? Am I right?

What you mean by "near"?

The interest rate differential will almost certainly fall considerably, which will weaken the AUD, but I don't know what cash rate level is already being priced in by the market.

 

I guess it'll probably be in the next 6 months because companies and countries are still adjusting to the new market conditions.

My eyes are on China, watch out they are loaded with greenbucks

China considers fund to buy overseas resources - China Economic Review

Steel output, copper demand rise - China Economic Review

Wen: Steel industry improving - China Economic Review

 

There is no doubt India as a next “developing” country waiting in queue to replace China as a next “world factory”. I wonder if this can be the answer in case of prolonged recession/depression.

 

"I didn't know if you did or didn't, thus the reason I asked.
I think your a pretty switched on guy, so I reckon you will have at least small exposure to gold? Am I right"

What do you mean by small exposure to gold?
Are you taking about gold trading?

 

Following up from a few months ago...

According to finance.yahoo.com.au the usd/aud is 0.8136...

Anyone want to guess how high it will go?...

Maybe I will get to go to Hawaii when we hit parity

My conspiracy theory is that China is dumping their USD to get buy better yielding/quality assets in Australia (Government Bonds, Corporate Bonds, Aussie Equities).

Cheers,

PS This is a guess, I don't have a crystal ball and I don't know the future .

 

Short /medium term: 0.8135, 0.8155, 0.8202, 0.8242...(at the moment 0.8122)
Why would you like to go to Hawaii?

 

Never been
And a holiday would be nice

At the rate it's going, it'll be thru 0.825 very soon IMHO.

Cheers,

Dan

PS I don't have a crystal ball, I have no idea.

 

"Never been
And a holiday would be nice"

I would say that Hawaii is a joke compare to North Queensland. But you may like it.

 

Hows this for a call... If the recovery continues I wouldn't be surprised if we reach parity by the end of the year.



At the end of the day I think the US is stuffed, being in Asia and rich with resources we will be dragged out of this recession as Asia begins to look for more inwards based growth.

I also get the impression they are moving out of long US T's (or at least not buying like they used to), but I wouldn't go as far to say that they were buying Aussie government bonds as our yields are slipping just like the US's, just not as dramatically.

 

Maybe they are buying our mining companies!!!
Or our banks??? They could be turning the tables and buying ANZ as it has always been trying to get a foot into asia...

I have no idea!!!

Though I won't be surprised if we do hit parity.

Cheers,

Dan