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The case for shorting the Australian dollar. Sell the Aussie dollar before it's too late.
Topic Started: 10 Jul 2014, 12:31 AM (2,133 Views)
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What it would take to knock the Aussie dollar?

September 9, 2014 - 4:00PM
Misa Han

The Australian dollar dropped by more than 1 cent Monday night and Tuesday, giving an indication of what might spark a steeper correction in the stubbornly strong currency.

Monday night the local currency dropped to US92.77¢, after a letter by the San Franciso Federal Reserve's research department warned the US central bank could hike rates more quickly than investors expected.

Softer than expected local business confidence and home loan data took a further toll on the Aussie, which hit a two-week low at US92.55¢ in Tuesday late trade.

The Australian dollar has been stuck above US92¢ for the past six months, despite the iron ore price tumbling to a five-year low and all the other major currencies surrendering to the strong US dollar.

Historically high global liquidity has boosted the local currency, as the country's AAA-rated bonds remain attractive to global investors in search for higher yields than what US, Japanese or European securities offer.

The European Central Bank's latest package of fresh interest rate cut and new plan to buy asset-backed securities and covered bonds is expected to pump even more liquidity into the global market, buoying the Australian dollar.

Analysts reckon a correction is long overdue, but so far the currency has stubbornly resisted the jawboning by Reserve Bank of Australia governor Glenn Stevens.

However, the most recent tumble gave an indication of what it might take to bring the dollar down to levels seens as more sustainable by the RBA.

A more aggressive than expected tightening by the Fed is one external shock that could contribute to the Aussie finally surrendering some of its strength, Westpac said in a note.

Read more: http://www.smh.com.au/business/markets/currencies/what-it-would-take-to-knock-the-aussie-dollar-20140909-10e76q.html
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Sell the Aussie dollar before it's too late

Sun, 05 Oct 2014 | Stephen Koukoulas

The Australian dollar has already fallen a long way – a peak of US$1.10 in late 2011 and 0.95 from four months ago to under 0.87 at the moment.

Some might suggest that this sort of depreciation is sufficient given the still upbeat outlook for growth from the RBA and a bunch of other optimists, and the fact that the world's largest economy, the US, is looking entrenched in its long awaited recovery from the Lesser Depression.

The influences on the Australian dollar at the moment are very ugly.

The oil price (west Texas intermediate) is under US$90 a barrel, iron ore is under US$80 a tonne, gold is floundering around $US1,190 an ounce and copper is under $3.00 a pound.

The terms of trade, already down around 25 per cent from their peak, are set to fall further – possibly by a large amount.

This would not be too much of a worry if the domestic economy was showing signs of robust growth. Alas, the opposite is happening. Retail sales are sluggish, recording no growth in real terms over the last couple of quarters. House building approvals are also flat to down, having peaked some six months ago. Add to that a bout of fiscal austerity as the government ignores economics and tries to urgently more to budget surplus makes it very difficult to create a scenario where GDP will grow at 3 per cent or more.

What's more, the unemployment rate has been above 6 per cent for the last two months, something that Australia has not seen for 12 years. Wages growth is also falling in real terms and the Westpac measure of consumer sentiment has been below 100 index points for seven straight months. It is just about impossible to see GDP growth near 3 per cent if these trends continue.

Unfortunately, things are deteriorating.

When the penny drops at the RBA and it realises that disinflation will be a great threat than inflation in the year ahead and it moves to cut interest rates, another critical support for the Australian dollar will be gone.

Who knows how low the Aussie dollar will go. A case can already be made for an exchange rate of 0.80 – falls beyond that seem likely once the markets deal with on-going bearish news. As noted before, Deutsche Bank went out on a limb earlier this year suggesting 0.66 was on the cards for 2015 and it looks increasingly likely that that Black Swan forecast will be close to the mark.

Read more: http://thekouk.com/blog/sell-the-aussie-dollar-before-it-s-too-late.html#.VDGy1g4jqvk.twitter
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The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt — Bertrand Russell
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Global growth worries weigh on Australian dollar

October 10, 2014 - 8:04AM

The Australian dollar is almost one US cent lower as concerns grow about slower global economic growth.

At 0700 AEDT on Friday, the local unit was trading at 87.76 US cents, down from 88.68 cents on Thursday.

Germany's leading economic institutes say Europe's largest economy would grow by just 1.3 per cent in 2014, much lower than the 1.9 per cent growth they had previously expected.

The forecast comes a day after the minutes of the US Federal Reserve's September meeting showed there were concerns about weak growth overseas.

Read more: http://www.smh.com.au/business/markets/currencies/global-growth-worries-weigh-on-australian-dollar-20141010-113zrs.html
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Australian dollar surges as data rattles US

October 16, 2014 - 4:55PM
Scott Parker

The Australian dollar surged after the greenback experienced "a capitulation" across the board on the back of weak economic data, more uncertainty around US interest rates and growing Ebola fears.

The Aussie jumped as much as 1.7 per cent to an overnight high of US88.59¢, before once again experiencing an intraday turnaround to fetch US87.85¢ in late local trade on Thursday.

Nomura head of global markets Australia Jon Linton said the selloff was sparked by a number of factors, such as worries about an impending US Federal Reserve rate rise, the traction of the US economy, global growth concerns and Ebola panic.

"The US dollar has weakened across the board against just about everything on the back of quite extraordinary volatility last night," Mr Linton said.

"At one point I think we saw the largest move in bond yields certainly since 2008."

Mr Linton said weak US producer prices and retail sales data contributed to the capitulation but said no area was safe with equities, currency and bonds all being heavily sold off in the US market.

"It was really a US story, it was a story of disappointment of performance in the US economy, rather than anything to do specifically with Australia," Mr Linton said.

Westpac Banking Corp senior market strategist in Wellington, Imre Speizer, said risk aversion accelerated overnight.

He said the disappointing US data, along with additional reports on the spread of the Ebola virus, had driven the moves, but the Australian dollar had fared well.

"[The Australian dollar was] weighed by global risk aversion but supported by US dollar weakness," Mr Speizer said. "We favour a rise towards US88.50¢."

Read more: http://www.smh.com.au/business/markets/currencies/australian-dollar-surges-as-data-rattles-us-20141016-1176l3.html
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