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Australian dollar at six-month low as US rate rise talk grows
Topic Started: 10 Sep 2014, 04:08 PM (1,612 Views)
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Australian dollar at six-month low as US rate rise talk grows

September 10, 2014 - 10:26AM
Mark Mulligan

The Australian dollar has dipped below US92¢ for the first time in six months on growing signs that both the US and the UK will begin lifting interest rates well before the Reserve Bank of Australia.

In early local trade on Wednesday, the Aussie recovered slightly to US92.06¢, but not before dropping to US91.88¢ in late New York trading. It was the first time the local unit had moved outside its US92¢-to-US95¢ band since late March.

The slip reflects growing support for the US dollar, as markets start to price in monetary tightening by the Federal Reserve, which is expected to provide more details on its policy schedule after an Open Market Committee meeting next week.

The Fed is set to end its asset-buying, quantitative easing program in October and is likely to start lifting interest rates before the middle of next year. In the meantime, it will need to draw liquidity away from the short end of the bond yield curve through a series of complex market operations.

Surging investor demand for the greenback drove the world's reserve currency to fresh highs against most of the other major currencies overnight. Against the yen, it climbed to a six-year high, while the beleaguered euro dropped to a 14-month low against the dollar before bouncing back slightly.

US equities sold off, with the Dow Jones Industrial Average down 0.6 per cent on the session.

"The rise in Treasury yields and decline in US stocks confirm that investors are pricing in tighter monetary policy from the Federal Reserve," BK Asset Management Managing Director Kathy Lien said.

"This does not mean that the market expects the Fed to raise rates soon but ending quantitative easing in October is a move to unwind and not increase stimulus."

With other major economies such as Japan and the European Union forced to extend their monetary easing to combat economic stagnation and deflationary pressures, the allure of the greenback can only grow, she said.

In the United Kingdom, meanwhile, the looming threat of Scottish independence has worked against what should have been a rally in pounds sterling. With UK recovery continuing apace, the Bank of England is widely expected to be the first central bank of the main global economies to starting lifting interest rates.

Read more: http://www.smh.com.au/business/markets/currencies/australian-dollar-at-sixmonth-low-as-us-rate-rise-talk-grows-20140910-10ervp.html
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Gossamer
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The US Federal Reserve have backed themselves into a corner and cannot increase the interest rates. This talk is all smoke and mirrors.
Common sense is a curse - those who have it need to suffer dealing with those who don't have it.

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Nelson
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Count du Monet
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No, they won't! The FED is at permanent ZIRP. If the FED put up rates, it would be the first thing to explode!
The next trick of our glorious banks will be to charge us a fee for using net bank!!!
You are no longer customer, you are property!!!

Don't be SAUCY with me Bernaisse
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Poontang
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The cynic in me won't at all be surprised to see them raise rates just to be able to say things were improving. Then, Oh, because of Europe and China, things have gone backwards and the economy needs our support again to get the QE ball rolling again...
There are some people who seem angry and continuously look for conflict.
Walk away, the battle they are fighting isn't with you, it's with themselves.

The first lesson of economics is scarcity: There is not enough of anything to satisfy all who want it.
The first lesson of politics is to disregard the first lesson of economics. ~ Thomas Sowell.

Who was the fool, who the wise man, who the beggar or the Emperor? Whether rich or poor, all are equal in death.
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miw
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Count du Monet
10 Sep 2014, 05:52 PM
No, they won't! The FED is at permanent ZIRP. If the FED put up rates, it would be the first thing to explode!
So I assume you have bought some 30-year Treasuries? They will surge in value when everyone else in the market realises they are wrong and you are right. :lol :lol :lol
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
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Jimbo
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miw
10 Sep 2014, 06:46 PM
So I assume you have bought some 30-year Treasuries? They will surge in value when everyone else in the market realises they are wrong and you are right. :lol :lol :lol
I doubt that the US will raise rates anytime soon. They still have the problem of low or stagnant wage growth as does the UK.

When you have +6% unemployment, you don't have to compete so hard for labour so where will the wage rises come from?

It is just a confidence game at the moment. Fed and BoE jawboning about raising rates to send out the "all is well" message.

http://www.dailymail.co.uk/money/news/article-2749199/UK-rate-hike-getting-closer-says-BoEs-Carney-labour-market-weak.html


Edited by Jimbo, 10 Sep 2014, 08:02 PM.
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be :?: rising.
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miw
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Jimbo
10 Sep 2014, 07:58 PM
I doubt that the US will raise rates anytime soon. They still have the problem of low or stagnant wage growth as does the UK.

When you have +6% unemployment, you don't have to compete so hard for labour so where will the wage rises come from?

It is just a confidence game at the moment. Fed and BoE jawboning about raising rates to send out the "all is well" message.
Then go buy some 30-year treasuries. A drop in yield of 25 basis points will give you a pop in price of about 5%, and they will drop by at least 75 basis points once the market acknowledges the correctness of your position.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
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stinkbug
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The US won't want to bugger a recovery. They'll leave rates right where they are until the recovery is well underway and widespread.
---------------------------------------------------------------

While it's true that those who win never quit, and those who quit never win, those who never win and never quit are idiots.

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Jimbo
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miw
10 Sep 2014, 08:15 PM
Then go buy some 30-year treasuries. A drop in yield of 25 basis points will give you a pop in price of about 5%, and they will drop by at least 75 basis points once the market acknowledges the correctness of your position.
Already got some. Mainly as a bet against the AUD.
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be :?: rising.
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Mike
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Gossamer
10 Sep 2014, 05:51 PM
The US Federal Reserve have backed themselves into a corner and cannot increase the interest rates. This talk is all smoke and mirrors.
You are wrong.
Jimbo
10 Sep 2014, 07:58 PM
I doubt that the US will raise rates anytime soon. They still have the problem of low or stagnant wage growth as does the UK.

When you have +6% unemployment, you don't have to compete so hard for labour so where will the wage rises come from?

It is just a confidence game at the moment. Fed and BoE jawboning about raising rates to send out the "all is well" message.

http://www.dailymail.co.uk/money/news/article-2749199/UK-rate-hike-getting-closer-says-BoEs-Carney-labour-market-weak.html

US will raise rates much sooner then you expect. Rates will start to rise next year and keep rising for some time.
Edited by Mike, 10 Sep 2014, 08:44 PM.
http://mike-globaleconomy.blogspot.com.au/
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