Falling $AUD

[Maka]

With thanks to the ABC -

US improvement main reason for Aussie dollar dive
By online business reporter Michael Janda
Updated Fri May 17, 2013 6:23pm AEST


Currency analysts say renewed confidence in the US economic recovery is combining with increasing worries about Australia's economic outlook to push the local currency down against the greenback.

The Australian dollar has fallen about 6 cents against the US currency in the past two weeks, with more than a cent of that fall happening over the past day.

That took the local currency to an 11-month low against the greenback of 97.36 US earlier today - a trough which it was close to matching late on Friday afternoon, at 97.48 US cents by 4:41pm (AEST).

Westpac's senior currency strategist Sean Callow says investors are expecting the US central bank to start winding back its stimulus program, pushing the greenback higher and the rapidly growing supply of US dollars slows down.

"The [rise of the] US dollar is probably the main driver of it [the fall in the Australian dollar], and particularly nerves over whether the Fed might start to reduce some of its very generous monetary policy, its money printing effectively," he told ABC News Online.

The fact that we have seen the currency decline, and if it stays at these levels, suggests that the pressure's off the Reserve Bank to cut even further in the coming months.
Citi senior economist Joshua Williamson
"But there's no doubt the Aussie is underperforming many other currencies for specific Aussie reasons."

Citi's senior economist Joshua Williamson says, aside from expectations of a reduction in US money printing later this year, the Australian dollar has finally been hit by falling commodity prices, evidenced by its fall against a wide range of other currencies.

"It has probably been overvalued, certainly against commodity prices, and currencies like the euro and the yen had been much weaker to start with, so its probably an easier play when we start seeing that trend decline in the Aussie dollar for investors to actually jump on board and continue to drive it lower against a whole basket of currencies," he said.

'Follow that momentum'
Sean Callow agrees that an element of herd mentality has helped push the Australian dollar lower over the past couple of weeks, particularly after rumours surfaced of large currency speculators, such as George Soros, making bets against the Aussie.

"Once you start to get to some of the lowest levels we've seen since the middle of last year, then people do just follow that momentum," he said.

"So some people don't necessarily need any fresh news, they just need to see the Aussie is not bouncing."

Mr Callow expects to see a bounce in the Australian dollar over the next month or two as investors and corporations take advantage of the low Australian dollar to buy the local currency.

The last time the dollar dipped to these levels, many businesses took the chance to covert some of their foreign currency holdings into Australian dollars, or lock in currency hedges at the lower exchange rate.

While the fall in the dollar is excellent news for trade-exposed business in one sense, economists say it is also likely to take the pressure off the Reserve Bank to cut interest rates again in the near term.

"They have previously said that one of the reasons why they've taken rates so low is to partly offset for the contractionary effect of the currency," Mr Williamson told ABC News Online.

"The fact that we have seen the currency decline, and if it stays at these levels, suggests that the pressure's off the Reserve Bank to cut even further in the coming months."

cheers, Maka

[damoose]

Originally Posted by Work Horse

You wish to engage in political point scoring while pretending to discuss the falling Australian Dollar. I'm not interested...

The Australian Dollar was floated in December 1983.

The rise and fall of the Australian Dollar is not a barometer of how well the government is doing, the market determines its value.

The Australian Dollar is historically high at the moment and has been for a prolonged period. It is really hurting some parts of the economy including manufacturing and exports.

It is not a matter of if the Australian Dollar will come down but when.

We are talking about the Australian Dollars exchange rate against the US dollar. I would suggest the rate has way more to do with what is happening in the US economy and next to nothing to do with the Australian government.

The recent fall in the Australian Dollar can be directly linked to recent signs of improvement in the US economy.

If the US economy continues to improve the Australian Dollar will continue to fall. There is nothing any Australian government could do about it.

100% Accurate summation

[cheap]

Originally Posted by Work Horse

You wish to engage in political point scoring while pretending to discuss the falling Australian Dollar. I'm not interested...

What a diversion, so the devalued dollar can not possibly be a by product of failure of government policy and even if it were you're not interested.

Originally Posted by Work Horse

The Australian Dollar was floated in December 1983.

What is the relevance of 1983 to the past fortnights events?

Originally Posted by Work Horse

The rise and fall of the Australian Dollar is not a barometer of how well the government is doing, the market determines its value.

So therefore a government can mislead the market, mismanage the economy and deliver deficit after deficit without any consequence. Is that how things work for you?

Originally Posted by Work Horse

The Australian Dollar is historically high at the moment and has been for a prolonged period. It is really hurting some parts of the economy including manufacturing and exports.

Doh

Originally Posted by Work Horse

It is not a matter of if the Australian Dollar will come down but when.

Doh

Originally Posted by Work Horse

We are talking about the Australian Dollars exchange rate against the US dollar. I would suggest the rate has way more to do with what is happening in the US economy and next to nothing to do with the Australian government.

Ever heard of TWI, the USD TWI has been going south for months. Is that a sign of economic improvement?

Originally Posted by Work Horse

The recent fall in the Australian Dollar can be directly linked to recent signs of improvement in the US economy.

Unicorn Warning, you mean the Dow Jones going up? All other economic indicators show the US economy is in a coma. Of course the Dow Jones is infallible, it's never had a hick-up before has it?

Originally Posted by Work Horse

If the US economy continues to improve the Australian Dollar will continue to fall. There is nothing any Australian government could do about it.

How about providing meaningful proof that the US is improving, huge reduction in unemployed, consumer confidence improved, housing recovery, huge number of people off "food stamps", reduction in government deficit and so on. Of course with the US economy having flat-lined for so long people now consider coma to be the new normal state.

You can divert attention away from government failure all you like, I find totally hypocritical to accuse me of being political whilst you quote verbatim from their script "our economy is the envy of the rest of the world".

[Work Horse]

Originally Posted by cheap

What a diversion, so the devalued dollar can not possibly be a by product of failure of government policy and even if it were you're not interested.



What is the relevance of 1983 to the past fortnights events?



So therefore a government can mislead the market, mismanage the economy and deliver deficit after deficit without any consequence. Is that how things work for you?



Doh



Doh



Ever heard of TWI, the USD TWI has been going south for months. Is that a sign of economic improvement?



Unicorn Warning, you mean the Dow Jones going up? All other economic indicators show the US economy is in a coma. Of course the Dow Jones is infallible, it's never had a hick-up before has it?



How about providing meaningful proof that the US is improving, huge reduction in unemployed, consumer confidence improved, housing recovery, huge number of people off "food stamps", reduction in government deficit and so on. Of course with the US economy having flat-lined for so long people now consider coma to be the new normal state.

You can divert attention away from government failure all you like, I find totally hypocritical to accuse me of being political whilst you quote verbatim from their script "our economy is the envy of the rest of the world".

Mate you are dead set on having a political argument with someone.

I actually said "The value of the Australian Dollar and the performance of our economy are the envy of the developed world." I was quoting no one verbatim, it's my opinion.

I then said "It has next to nothing to do with what a few hundred elected representatives are doing in Canberra (what ever side they are from ). And everything to do with what the rest of us are doing."

I've run a successful small business for over fifteen years. I made it work, in spite of any government not because of them. It is not political parties that make this country great; it's the rest of us working hard.

I'm sick of people constantly running the country down for some sort of political point score.

My opinion is the Australian Dollar is falling against the US Dollar because of perceived improvements in the US economy. If you have another opinion great. I just don't see traders on the currency markets hanging off every word Australian governments make before deciding weather to buy or sell US Dollars....

[chamb0]

Cheap, maybe you need to take it up with Standard & Poor's, Moody's and market investors; they aren't seeing it that way:

http://www.businessspectator.com.au/...-trading-floor

The best guide to the strength, veracity and appropriateness of the budget lies not what in you or I might think about it, but rather, how the financial markets have reacted to it.

Financial markets have a habit of going for the jugular when an economy is on its knees or when fiscal policy is inept, broken or unsustainable.

Poor or misguided economic policy, bad economic news or heightened risks of government financial troubles will be met with heavy bond selling, the risk of a stock market rout and even a move on currency markets.

Now that the markets have had 12 full hours to examine Australia’s government finances, plus a lot of extra time in the days and weeks past as a lot of information has seeped out into the public domain, how have they reacted?

To the bond market first. During trade yesterday, the 3-year government bond was trading around 2.57 per cent, plus or minus a few one-hundredths of a percentage point. The 10-year government yield was trading around 3.24 per cent, give or take a little.

In overnight futures trading, the 3-year yield has risen to 2.61 per cent while the 10-year yield is 3.28 per cent. In other words, bond yields are around 4 basis points higher. This rise in yields has matched the sell-off in the US, no more or less, which is a sure sign that the local bond market is agnostic when it comes to assessments about the budget. The concerns about a budget “in chaos”, the government “losing control of fiscal policy” and all the other emotive analysis is not reflected in the bond market.

The bond market reaction was undoubtedly helped by the announcement of Moody’s ratings agency to affirm Australia’s triple-A credit rating after it saw the budget and the profile for the budget to move to surplus and confirmation that net government debt will remain at wafer-thin levels at 11.4 per cent of GDP.

Standard and Poor’s also maintained the triple-A credit rating noting that “the government continues to demonstrate a commitment to prudent fiscal policy over the medium term”.

In terms of stocks, the ASX200 had yet another solid day yesterday, rising 0.4 per cent to 5221 points, a fresh five-year high and up some 30 per cent since the middle of last year. Overnight, in the wake of the budget news and, of course, more importantly, a positive lead from US stock trading, the futures market is 25 points stronger again.

No sign of investors wanting to take their money out of the Aussie stock market because the budget is in “tatters”.

For the currency market, the Australian dollar continued its move lower, and is currently trading just off the low point at 98.90 US cents. It must be said that the US dollar was stronger against the euro and British pound, for example. But those reading the Treasury budget papers closely would have noted analysis that suggested the Australian dollar is overvalued relative to the terms of trade which may have continued the market’s reassessment that the Aussie dollar was well overdue for a correction.

The Australian dollar decline has occurred even though there are no obvious signs of selling from global investors wanting to sell other Australian assets. In other words, the traders and investors are looking at issues outside the budget and fiscal policy for guidance.

The market has seen the budget, witnessed the evolution of the various spending and revenue measures and its verdict from a trading perspective is obviously neutral.

The bottom line is that Australia’s budget and fiscal settings are in sound shape. There are small budget deficits forecast for the next two years and there is a return to surplus after that. At the same time, the level of net government debt will peak at 11.4 per cent of GDP – a figure that would not see any ratings agency or international investor blink an eye.

With the budget out of the way, it is back on to inflation, global economy and monetary policy watch.

And this is even coming from a News Ltd owned enterprise!

[mik]

i guess what conclusion you come to depends whose budget figures you read, of course you can always trust govcos figures

http://www.afr.com/f/free/markets/ma...jTv5WShIW8ojNO

Debt higher than budget figures show

CHRISTOPHER JOYE
I hate to be the bearer of bad news, but you’ve been misled about two key things on Australia’s financial situation.
First, the debt figures touted by the government, its lobbyists and certain sections of the media suffering Stockholm syndrome after the usual press gallery conditioning and a six-hour budget lock-up are totally bogus. The real numbers are much worse.
Second, this budget is not the austere, responsible plan that shores up the Treasurer’s credibility and validates Australia’s commitment to balancing its books through the cycle.
Let’s deal with debt first. Actual or gross debt is a much more transparent measure of how much Australia owes other people than the “net” figures bandied around. For example, the government uses a big chunk of the $85 billion Future Fund, which Treasury says “was established … to accumulate financial assets and … address the Government’s unfunded superannuation liability”, to lower its net debt figure.

This might be reasonable if the government added the “unfunded super liability” to its debts to begin with. But Treasury discloses that “net debt does not include superannuation-related liabilities”.
The government also doesn’t recognise liabilities associated with the free taxpayer guarantee of about $700 billion of bank deposits (they are all “contingent”). If the deposit guarantee was priced, this would not be an issue – but the Treasurer has ignored advice from the Council of Financial Regulators to do so.
All up, the government reduces its gross debt by about $70 billion through an “other investments” line item, including Future Fund assets. If we remove this influence, the low net debt figure of 10.6 per cent of GDP in 2012-13 jumps to about 16 per cent.
Here’s the next debt scam. In contrast to many other nations, Australia has a federated structure where government is divided among Commonwealth, state and local layers.
But when talking about Australia’s government debt, politicians and the media mostly like to assume state and local government does not exist. This is despite the Commonwealth explicitly guaranteeing state government debts during the GFC.
Remarkably, the most commonly cited net debt calculations also exclude the debts of the wholly government-owned companies, like the various state financing entities, Australia Post and the NBN, which are all guaranteed by government.
The latest budget papers do have a table that breaks out net debt by the Commonwealth, state, and government-owned concerns.
And here’s the shock: Australia’s net debt figure is almost twice the 10.6 per cent estimate you’ve been told is so comforting – the real number was around 20 per cent in 2012-13. Importantly, this has exploded off a sub-zero base in 2007 when we had allegedly no net debt.
Excising the influence of the Future Fund and “other investments”, total government net debt rises to roughly 25 per cent (see first chart).
When financial markets consider a company’s riskiness, they focus on the gross level of borrowings relative to assets. We can do the same.
In 2007, the Commonwealth and states owed about $150 billion. These were just the bonds on issue and ignore other borrowings. By December 2012 Commonwealth and state government debt on issue had more than tripled to $500 billion. That’s nearly 35 per cent of GDP and excludes government-guaranteed companies. The true gross debt-to-GDP ratio is probably circa 40 per cent. While that is still relatively low, it is not the ultra-benign image that has been projected.
The second chart shows how Australia’s actual debt-to-GDP ratio has changed since 1990. You can see there’s been a big increase in leverage across the country, back towards levels after the searing 1991 recession. The difference, of course, is that in 1991 the jobless rate hit 11 per cent, in contrast to the 5.9 per cent GFC peak. And whereas the RBA floored its cash rate to 3 per cent in 2009, it averaged 8.5 per cent over 1991 and 1992.
This brings me to the final scam: this budget and its predecessors have significantly elevated Australia’s financial risks and are not the prudent policy settings of prescient seers. The decline in the $A is one sign of this.
The main reason we avoided the worst of the GFC is that we were in the biggest investment and export price boom in 150 years, and most of our trade is with countries – China, Japan, South Korea and India – not directly involved in the crisis.
Unfortunately, the folks running the show have expended Eamon Sullivan-like fiscal and monetary energy on policy that should have been pacing itself like Kieren Perkins.
A related concern is that the supposed commitment to balancing the books through the cycle is not backed by history. Taking government forecasts at face value, Australia will have produced surpluses just 40 per cent of the time since 1980. Even if we look at its performance since 1990, Australia will have delivered surpluses in only 11 of the 25 years to 2014-15.
The big sleeping problem is there is not much ammo left. While our jobless rate has been effectively unchanged for two years and the economy has bumped along close to its trend rate, the government has racked up cumulative budget deficits of about $200 billion. And now the RBA has pre-emptively slashed its cash rate to the lowest level in history.
If Australia suffers a big external shock in the next few years – not my base case – we could be in for a nasty surprise. And while nobody wants to talk about it, you might have to kiss goodbye to the AAA credit rating that keeps our borrowing costs so low.
Talking down Australia’s credit rating is taboo in market economist land because the big banks all rely on it for their own ratings. If the nation gets downgraded, so will they, which will drive up funding costs and undermine their profitability.
Here are two ideas to help lower the risk the budget books are cooked again. First, why not force Treasury to follow the RBA’s lead and publish 70 and 90 per cent upside and downside “confidence intervals” in their GDP forecasts? This would give people a real sense of what could go wrong.
Second, why not have Treasury simply use the RBA’s inflation, GDP, and unemployment rate forecasts, which would give the projections some bona fide independence?

[Maka]

"i guess what conclusion you come to depends whose budget figures you read, of course you can always trust govcos figures"[quote]

Bang on mik, i dont really see the Fin as being independent either...

Smart people know the authors / publishers political "bent" will always dictate whether the unequivacle "truth" comes out- i wonder how many people in the community realises this fact.

cheers, Maka

[Moby Vic]

Originally Posted by jpd80

Th weakening of the Aussie dollar could be concurrent with two things,
a reduction in official interest raates and a strengthening of the US economy.

Make no bones about it even though the US has massive debt, their economy's
capacity to pay is governed by the level of economic activity and if the US housing
industry and Auto industry are barometers for the US economy, then I predict
that the US dollar will rise in value against all other currencies in the next twelve months.

I think our economy is still in a recession. Every time there's a fuel price spike our economy tanks now. Employment is still not good here, either.

If the value of our dollar stays low, it could bring manufacturing jobs back to the US. That would be good, but the wages wouldn't.

[cheap]

This should be easy for people to understand.

A listed company announces to the market that it expects to make a profit whilst nearly every other company is losing money. The CFO repeatedly says they'll turn a profit, the CEO says 'guaranteed profit'. What happens to its share price?

Then without much warning the CFO sort of says a profit might be tough.
Then there is talk of a 7 billion dollar loss
Two weeks later it is a 12 billion dollar loss
Two days later it is a 19 billion dollar loss + massive losses for the next 3-5 years

What would happen to the share price?

This is exactly what our government has announced and people still somehow think the incompetence and obfuscation from this government hasn't in anyway contributed to the devaluation of the AUD!

F%£& Me Swinging!

[2011G6E]

Now they're saying petrol prices are set to jump because our dollar is falling...

...just like they do when the dollar is...erm...rising...*cough*...

[fordomatic]

Originally Posted by 2011G6E

Now they're saying petrol prices are set to jump because our dollar is falling...

...just like they do when the dollar is...erm...rising...*cough*...

Such a good post

[Pepscobra]

So the AUD today hit US92.5c... How much lower will it go?
Lowest its been in 3 years.

Could this be good news for the future of the Falcon?

[RANGEREST]

Originally Posted by Pepscobra

So the AUD today hit US92.5c... How much lower will it go?
Lowest its been in 3 years.

Could this be good news for the future of the Falcon?

Wont be good news for the Falcon sadly, but hopefully it will be for a lot of manufacturing industries.

[Pepscobra]

If it falls to 80c like many are predicting, this is effectively a 20% difference to what it has been for the better part of the last few years.

Maybe too late for Ford, but I hope it helps Holden's fate.

[wrongwaynorris]

" Cheap, maybe you need to take it up with Standard & Poor's, Moody's and market investors; they aren't seeing it that way: "

This would be the same Moodys and Standard and Poors who , along with Fitchs , knowingly gave totally worthless CDO's AAA ratings and were complicit in destroying the American and ultimately the world economy .

[Maka]

Originally Posted by wrongwaynorris

" Cheap, maybe you need to take it up with Standard & Poor's, Moody's and market investors; they aren't seeing it that way: "

This would be the same Moodys and Standard and Poors who , along with Fitchs , knowingly gave totally worthless CDO's AAA ratings and were complicit in destroying the American and ultimately the world economy .

If John says its fine its right, right lol?

http://www.smh.com.au/opinion/politi...514-2jke5.html

cheers, Maka

[Keepleft]

Constant joy here:-
http://theeconomiccollapseblog.com/

[zilo]

So...when we are at "parity"...being 1:1 with the US dollar...

We are overvalued when we pit ourselves against their depressed economy?

We have the greatest mining boom of all time and we only just get to parity with the US ...who are in a severe recession?


And we all think we can't compete cause we really should be in a worse state?


How nice.....

[2011G6E]

The floating of the dollar is important because that was the beginning of fluctuations up and down. Before that it was linked to the US dollar (and earlier the Pound).

Bit of history from Wikipedia:

In 1966, when the Australian dollar was introduced, the international currency relationships were maintained under the Bretton Woods system, a fixed exchange rate system using a U.S. dollar standard. The Australian dollar, however, was effectively pegged to the British pound at an equivalent value of approximately 1 gram of gold.
The highest valuation of the Australian dollar relative to the U.S. dollar was during the period of the peg to the U.S. dollar. On 9 September 1973, the peg was adjusted to US$1.4875, the fluctuation limits being changed to US$1.485–US$1.490;[15] on both 7 December 1973 and 10 December 1973, the noon buying rate in New York City for cable transfers payable in foreign currencies reached its highest point of 1.4885 U.S. dollars to one Australian dollar.[16]
On Monday 12 December 1983, the Australian dollar was floated, allowing its value to fluctuate dependent on supply and demand on international money markets. The decision was made on 8 December 1983 and announced on 9 December 1983.[17]
In the two decades that followed, its highest value relative to the US dollar was $0.881 in December 1988. The lowest ever value of the Australian dollar after it was floated was 47.75 US cents in April 2001.[18] It returned to above 96 US cents in June 2008,[19] and reached 98.49 later that year. Although the value of the Australian dollar fell significantly from this high towards the end of 2008, it gradually recovered in 2009 to 94 US cents.
On 15 October 2010, the Australian dollar reached parity with the US dollar for the first time since becoming a freely traded currency, trading above US$1 for a few seconds.[20] The currency then traded above parity for a sustained period of several days in November, and fluctuated around that mark into 2011.[21] On 27 July 2011 the Australian Dollar hit a record high since the floating of the dollar. It traded at a $1.1080 against the US Dollar.[22] Some have even suggested the dollar could rise as high as 1.70 USD by 2014.[23]
Some commentators speculate that the value of the dollar in 2011 is related to Europe's sovereign debt crisis, and Australia's strong ties with material importers in Asia and in particular China.[24]

Our dollar used to be always worth well above the US dollar, but it was decided that this wasn't cricket, as we should be brought down a peg or two, so we floated our currency...people think it's odd to have a dollar worth as much if not more than a US dollar, but that used to be the norm. We had a powerful currency, but no more.

Now it has little to do with how well Australia is doing as a country or economy...it has more to do with what money market traders around the world think we should be worth.

[SB076]

http://au.businessinsider.com/slides...to-0-83-2013-6

I read a report that some European firm that values currencies suggested the AUD is highly over valued and they suggest its true value is around $0.70 USD (cant find the article though) I agree with the article above and my guess is the AUD will be around $0.85 USD by years end.

Governments can and do have the ability to manipulate the value of their currency (search "Currency Wars") China, US, Japan and Taiwan have all taken measures to devalue their currency. However I don't believe the Australian Government has done anything in relation to our dollar.

[zilo]

Hit 0.90 today....3rd july 2013

[Spudz27]

Sadly I enjoyed the times that the dollar was high. My hobby was waaaaaaay cheaper to buy from hobby shops online than locally. But I also welcome the fall in the dollar, I still tried to buy things from my local hobby shop, but often I could get 2 planes from overseas to their one. But for my expensive planes I bought all my parts solely from the local guy. Anyhow whilst I admit to buying overseas during the high times, I also admit that the lower AUD will hopefully get these little guys out of some dire times and see more people being employed again.

[Pepscobra]

It's been pushing US0.90 for most of this week.
If it breaks this important resistance level, I see it falling to US0.87, and maybe lower in the coming weeks.

[Pepscobra]

My predictions haven't been too far wrong.
A further RBA rate cut tomorrow might ease it a bit more, but I think the market has probably already factored that one in.

Some economists now are predicting US80c by the end of the year. But all it needs is for something big to happen in China and the game will change again, such is our dependence on their economy.

[snowcone]

Sucks!
Had to get a pair shockys for the Exploder from the US today and exchange on the invoice was 85c.
Although, even if it was 50c it would still be cheaper for the parts than from the thieving bastards in Australia.

[ebxr8240]

U.S are STILL printing money!!

[zilo]

Good to know we can't even make 1:1 parity with basket case economies anymore.

[Maysik]

Originally Posted by Spudz27

Sadly I enjoyed the times that the dollar was high. My hobby was waaaaaaay cheaper to buy from hobby shops online than locally. But I also welcome the fall in the dollar, I still tried to buy things from my local hobby shop, but often I could get 2 planes from overseas to their one. But for my expensive planes I bought all my parts solely from the local guy. Anyhow whilst I admit to buying overseas during the high times, I also admit that the lower AUD will hopefully get these little guys out of some dire times and see more people being employed again.

^^^^^^^

My hobby of putting American cars/trucks together meant 98% of my items need to come from the States, being yank cars/trucks. When over parity=laughing, under = not so much. Could not give a rats about tourism, they will still come here.

[Pepscobra]

So, how much further is the AUD going to fall?

[CQB-241]

Originally Posted by Pepscobra

So, how much further is the AUD going to fall?

Don't know, but all those "cheap" imports are going to start to hurt soon.

A country which doesn't make anything and commodities worth nothing....