S&P500 v AUD

Discussion in 'Sharemarket News & Market Analysis' started by Tropo, 16th Mar, 2012.

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  1. Tropo

    Tropo Well-Known Member

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  2. Chris C

    Chris C Well-Known Member

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    Wow talk about getting caught up looking at trees rather than the forest...

    I think the "bulk" of the explanation is simply that the USD is being devalued as part of the US deleveragin cycle which it needs to go through for the US to become competitive again, and during these process there are going to be movements against this trend can occur due to irrational fear and optimism, that move the market against the obvious trend or rational expectatiion (ie the USD being a safe haven over the longer term is clearly rediculous but in the short term it might make sense)

    This recent divergence is simply that.

    The AUD being a commodity linked currency is protected by the devaluation that the USD is going through because the commodities are appreciating relative to USD, which holds the AUD up.

    AUD will continue to strengthen against the USD over time, not because the AUD is amazing, but because the USD is terrible. So what is really happening is the USD is weakening relative to the AUD (and pretty much everything else be it commodities or emerging market currencies).