Aussie dollar to drop below 66c - "benign" collapse ahead

Everyone have their parachutes ready? The AUD just fell through 87c.

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Our export partners have a healthy economy with a just as healthy appetite.
The high demand for Australian commodities almost matches the high price willing to be paid for such commodities.
New mining companies are starting up every week.
The housing market is competitively priced.
Unemployment is down.
Our American cousins are envious of our stronger dollar.
We have a sensible budget that is flying through the house.


Don't worry everything is going to be fine.

http://www.youtube.com/watch?v=Y_17Krhuwbc#t=36s.
 
If the drop continues then it will impact consumer sentiment as goods become more expensive. Add with the continuing declines in resource prices (even with a declining dollar) and further job losses, and we could soon see the Australian economy slide into a recession.
 
It will help mining though. Makes wages more competitive when those costs are added to production.
At 1:1 with the price of iron ore we could lose the one leg we have left to stand on.
 
AUD/USD Aussie Slide Continues on Excellent US GDP

AUD/USD has posted losses on Tuesday, continuing the trend which started the week. The struggling Aussie has lost about 140 points since the start of the week. Early in the North American session, the pair is trading in the mid-0.85 range. On the release front, the sole Australian release was a speech from RBA Deputy Governor Philip Lowe in Sydney. We'll get a look at Construction Work Done early on Wednesday. In the US, GDP jumped 3.9% in Q3, beating expectations. Consumer Confidence slipped to 88.7 points.

The US economic growth continues to rack up impressive numbers, posting an excellent gain of 3.9% in Q3, well above the estimate of 3.3%. This followed a gain in Q2 of 4.2%, which also beat the estimate. The other key release, Consumer Confidence, was unexpectedly soft, dropping to 88.7 points. This was well off the estimate of 95.9 points.

http://www.marketpulse.com/20141125/audusd-aussie-slide-continues-excellent-us-gdp/
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AUD/USD Drops To Multi-Year Low Near 0.85

AUD/USD for Wednesday, November 26, 2014

The Australian dollar hasn't had a great last week as it has dropped sharply and in the last 24 hours moved down to a new multi-year low near 0.85. To start this new week it rallied back above 0.8650 again before falling lower in the last couple of days. In the week prior the Australian dollar was able to rally higher and bounce off multi year lows around 0.8550 and in doing so has moved back within the previously well established trading range between 0.8650 and 0.88. Earlier last week the Australian dollar ran into the resistance level at 0.88 again which stood tall and sent prices lower again. A few weeks ago it fell sharply from above the resistance level at 0.88 back down to the support level of 0.8650 before crashing further to a new multi-year high near 0.8550. During the last couple of months the Australian dollar has done well to stop the bleeding and trade within this range after experiencing a sharp decline throughout September which saw it move from close to 0.94 down to below 0.8650 and a then eight month low in the process. The resistance level at 0.88 remains a factor and is continuing to place downwards pressure on price, however more recently all eyes have turned on to the support level at 0.8650 to see if the Australian dollar can hold on and stay within reach again.


...Abundant supply is driving commodity prices lower, but the good news is that Chinese demand for Australian resources will continue as its economy evolves, the Reserve Bank says. A dramatic increase in commodity exports from Australia and other countries has increased global supply, pushing commodity prices down, RBA head of economic analysis Alexandra Heath said. Her comments to the NSW Mining Industry and Suppliers Conference in Sydney on Friday came after the iron ore spot price this week fell to a fresh five year low of around $US70 per tonne. "Much of the fall in iron ore and coal prices we have seen over the past year or so is the result of increasing global supply, but recently there has also been some easing in demand associated with slower growth in Chinese steel production," Dr Heath said. "The resulting fall in Australia's terms of trade is expected to weigh on household income." But while demand from China was slowing, it would continue to have a "huge appetite" for commodities of many kinds, she said. Dr Heath said China's urbanisation process had some way further to run, meaning demand for commodities to build housing, infrastructure, utilities and public buildings.

http://seekingalpha.com/article/2712125-aud-usd-drops-to-multi-year-low-near-0_85
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The Australian Dollar is Overvalued: ANZ Forecasters and RBA Warn on AUD's Sky-High Valuation

The expensive Aus dollar must ultimately fall lower say exchange rate forecasters at ANZ Research who confirm the currency is punching above its weight.

We publish ANZ's latest findings on the AUD on the day Deputy Governor of the Reserve Bank of Australia, Philip Lowe, tells us an overvalued currency is proving counter-productive to efforts to rebalance the Australian economy away from mining.

How Australia copes with the transition remains a key anxiety for policy makers and economists - it is argued that a strong currency will stifle non-mining exports and thus compromise the economy in the long term.

China Interest Rate Cut Won't Save the AUD

Regarding the recent decision by China's central bankers to cut their base rate, we note that there is unlikely to be any major boost for the AUD.

ANZ Research tell us:

"The interest rate cut in China does not materially change the outlook for the AUD. It was a signal that current levels of growth were not sufficient to meet the official target, but the challenging leverage dynamics in the economy mean that it is not a lever that can be pulled for too long - at least not without the market questioning the long term sustainability of China's growth."

http://www.poundsterlinglive.com/ex...change-rate-overvalued-say-forecasters-543545
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Just thought I'd update this thread, 0.83 was briefly touched today. During which the RBA reiterated that the AUD is still too high especially since a lot of Australian commodities are priced very low at the moment.
 
SovereignBuyerMelbourne said:
Just thought I'd update this thread, 0.83 was briefly touched today. During which the RBA reiterated that the AUD is still too high especially since a lot of Australian commodities are priced very low at the moment.
Click to expand...
The RBA is now hinting at the possibility of a rate cut, although analysts see the current rate to continue through 2015 and into 2016.

There was also this story which suggests rate cuts are needed but that they will also cause the property market to explode upwards:
Victoria's economy is weak enough to justify rate cuts

So weak is Melbourne's economy that to restore it to health the Reserve Bank would need to cut its cash rate to 2 per cent an all-time low. To restore the rest of Victoria to health, it would need to cut its cash rate to 1.5 per cent.

But so uneven is Australia's economy that if the Reserve Bank cut rates as much as would be needed to restore Victoria's fortunes, Sydney house prices would soar out of control.

The calculation forms the centrepiece of a new report titled Patchwork Economy: Implications for Policy Makers released on Friday by SGS Economics and Planning.

http://www.theage.com.au/victoria/v...o-justify-rate-cuts--sgs-20141127-11vi82.html
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SilverPete said:
SovereignBuyerMelbourne said:
Just thought I'd update this thread, 0.83 was briefly touched today. During which the RBA reiterated that the AUD is still too high especially since a lot of Australian commodities are priced very low at the moment.
Click to expand...
The RBA is now hinting at the possibility of a rate cut, although analysts see the current rate to continue through 2015 and into 2016.

There was also this story which suggests rate cuts are needed but that they will also cause the property market to explode upwards:
Victoria's economy is weak enough to justify rate cuts

So weak is Melbourne's economy that to restore it to health the Reserve Bank would need to cut its cash rate to 2 per cent an all-time low. To restore the rest of Victoria to health, it would need to cut its cash rate to 1.5 per cent.

But so uneven is Australia's economy that if the Reserve Bank cut rates as much as would be needed to restore Victoria's fortunes, Sydney house prices would soar out of control.

The calculation forms the centrepiece of a new report titled Patchwork Economy: Implications for Policy Makers released on Friday by SGS Economics and Planning.

http://www.theage.com.au/victoria/v...o-justify-rate-cuts--sgs-20141127-11vi82.html
Click to expand...
Click to expand...

If property prices increase incredibly wouldn't that worsen the economy, since we are in an income recession?

''Without that, the next government would be well advised to spend up big on infrastructure and build Victoria's skills, but that would take time.''

Good thing that the EWL is going to be cancelled lol (however I think its unlikely).

"In regional Victoria, consumer and business confidence is low and there are few external economic drivers."

I think the FTA with China will help regional Victoria especially the dairy farmers. The state produces 65% of Australia's milk and 80% of Australia's dairy exports.

''His calculations suggest Melbourne accounts for 17.7 per cent of Australia's economic activity and Sydney 22.6 per cent. Regional Victoria accounts for 4.3 per cent, about the same as Adelaide's 4.7 per cent. Regional NSW accounts for 8.6 per cent. Perth accounts for 9.6 per cent and regional Western Australia 6.8 per cent.''

I would of thought that WA would account to more of Australia's economic activity since they create a huge amount of GST revenue which is then redistributed to NT and TAS.

LNG needs to be developed in NT.
 
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