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

Argentum said:
US wont be raising its rates; theyd be shooting themselves in the foot
Click to expand...
Why would they be shooting themselves in the foot?
Please do not tell me it is because a rise in interest rates will make debt hard to pay.
The fact of the matter is ,when the interest rates go up, so does the governments take from us,so it is mout.
So please explain as i would love to understand.
If you do not understand my view i would happily explain in more detail.
 
The flow of capital from the rest of the world is going to send the equities market to an all time high. The U.S. government will be under pressure to do something to cool the stockmarket and they will raise rates.
If you read Martin Armstrong you will find out that the rest of the world are shitting their collective nappies in anticipation of such an event because of the amount of debt around the world that is priced in U.S. dollars. The dollar will rise even higher and crush the debt holders.....we are talking about trillions of dollars of debt...not U.S. government debt but private debt. This will send companies to the wall further exascerbating the economic decline.
 
sterling-nz said:
Argentum said:
US wont be raising its rates; theyd be shooting themselves in the foot
Click to expand...
Why would they be shooting themselves in the foot?
Please do not tell me it is because a rise in interest rates will make debt hard to pay.
The fact of the matter is ,when the interest rates go up, so does the governments take from us,so it is mout.
So please explain as i would love to understand.
If you do not understand my view i would happily explain in more detail.
Click to expand...

Because they have a huge private bond market that is keeping the equity market floating. Many of their best sectors in terms of employment (particularly energy) are already struggling to raise money and service their debt/bonds. A failure in confidence in the private bond market in even a few bigger companies could be a disaster. Investors are already suspicious about their ability to service commitments with current energy prices and the high dollar, adding a quater to a half percent to every dollar they owe is going to be another nail img the coffin.

For the most part they are still up and running because of hedging but there's only so much longer that can go on, you could see a run on the sector as hedges end that only 0% interest rates or bail outs can fix.

It's not just about government debt.
 
Thanks to the Ainslie daily news thread for the heads up on this one. AUD to 62c!

Yep, MS says 68 cents by year end and 62 cents next year, almost matching MB forecasts:

"Indeed, there was some market frustration with the recent rhetoric from the RBA that in one breath backs hard for a lower currency but then backs away from the easing bias that would have helped achieve this outcome," Morgan Stanley analysts, led by Chris Nicol, write in a note to clients.

"We are more sanguine on this front, and like other major central banks, we view the recent RBA rhetoric and positioning as one that seeks greater flexibility linked to the overarching concept of data dependancy."

Morgan Stanley expects soft data to eventually force the RBA's hand, taking the cash rate down to 1.75 per cent in the fourth quarter, from 2 per cent currently.

"The key short-term drivers of the US dollar will be growth and front-end yield differentials, which we expect to become even clearer with our team forecasting a strong retail sales figure on Thursday, adding to momentum from payrolls, housing data and the ISM."

CH3sj2Z.jpg


hQvQwsI.jpg


http://www.macrobusiness.com.au/2015/06/ms-australian-dollar-going-to-62-cents/
Click to expand...
 
mmm....shiney! said:
SilverPete said:
The US will be raising rates
Click to expand...

Will it?

SilverPete said:
while Australia is forced to keep rates on hold with the fall-off in mining investment hitting the economy hard
Click to expand...

I have only a marginal contact with mining, but we are expecting bumper coal exports this year, and there appears to be a variable response from mining companies in regards to employment ie those mines where workers are overpaid and full of fat lazy bastards are getting laid off while those that employ contractors are hiring. Like I said, I don't have my finger on the pulse but it is not doom and gloom across the sector as the MSM would have everyone believe.

SilverPete said:
Needless to say, if there are any hiccups with the Chinese economy then things will go from bad to worse very quickly for the AUD.
Click to expand...

Why wouldn't a Chinese hiccup affect the majority of Western economies? Why is Australia singled out?

SilverPete said:
With a growing population, increasing energy and food costs, a slowing economy, decaying infrastructure, accelerating unemployment and a critical lack of competitiveness against low cost and technologically progressive economies, we could see the quality of life in Australia begin to drop.
Click to expand...

The growing population is not really an issue (it is easily managed by restricting new arrivals), the other issues you point to are significant problems when a government takes primary responsibility for the maintenance and provision of necessary services upon itself.
Click to expand...

Looks like we are about to find out some answers to your questions.
 
This is great for people that bought into US denominated investments, gaining money because of the incompetence of our political landscape...... Almost like hedging Tony
 
Golightly said:
This is great for people that bought into US denominated investments, gaining money because of the incompetence of our political landscape...... Almost like hedging Tony
Click to expand...
Please tell me you don't actually think the dollar decline has anything to do with our current, inept, government?
 
Golightly said:
This is great for people that bought into US denominated investments, gaining money because of the incompetence of our political landscape...... Almost like hedging Tony
Click to expand...

Except for the capital gains tax. :/
 
Interesting article on ZH and this comment stood out.


Yen Cross
Yen Cross's picture
No actually, it's not that simple Phil.

Whats' happening is that traders are cross hedging Australian bond yields.

Traders are effectively shorting the Australian dollar and buying it's bond market simultaneously.

Traders are (Japan) buying the carry currency (usd) and swaping it for Yen, then shorting AUD vs Yen knowing that the Aussie bond market is small and Illiquid, and using that to set F/X rates, and making the exchange profitable, even though they're losing a few basis points on the sell side.

Japan is the culprate along with some East Asian and Middle Eastern cohorts.
Click to expand...

www.zerohedge.com/news/2015-07-24/aussie-dollar-tests-long-term-trendline-china-contagion-spreads?page=1
 
For anyone interested in getting into USD, I use HSBC multi-currency Flexi-saver to hold USD while I sit back and watch the AUD fall into oblivion. They seem to have one of the best conversion rates for a bank account. Don't make the same mistake I did of starting out with one of the Big 4 banks for a USD account. They will rip you off... Up yours Commbank.
 
HSBC is corrupt and will steal your money in the blink of an eye. Commbank at least does a wink.
 
The Black Ram said:
For anyone interested in getting into USD, I use HSBC multi-currency Flexi-saver to hold USD while I sit back and watch the AUD fall into oblivion. They seem to have one of the best conversion rates for a bank account.
Click to expand...

+1 for HSBC for having competitive FX rates, at least on account transfers, TTs and domestic payment orders etc.

If you have HSBC bank accounts you may also qualify for preferential FX cash rates at the Travelex operations within their branches.

Others have also provided decent feedback on Ozforex, but this is not an endorsement.

Full disclosure: No positions or agent relationship at time of writing. I don't stand to make any monetary or other material gains from anyone's decision to use/not use these services.

Don't make the same mistake I did of starting out with one of the Big 4 banks for a USD account. They will rip you off... Up yours Commbank.
Click to expand...

+1
 
Be very, very careful with HSBC.
Reggie Middleton of Boom, Bust, Blog does serious analysis of world banks.....wayyyyyyyy before Bear Stearns ( remember them) failed, his analysis was screaming get out......wayyyyy before Lehmans failed, his analysis was screaming get out.
HSBC, amongst many other European banks will be dead ducks when the bond market crashes.....it is only a matter of time....Check out his work .
You will end up like the Cyprus bank depositors.
 
JulieW said:
Interesting article on ZH and this comment stood out.


Yen Cross
Yen Cross's picture
No actually, it's not that simple Phil.

Whats' happening is that traders are cross hedging Australian bond yields.

Traders are effectively shorting the Australian dollar and buying it's bond market simultaneously.

Traders are (Japan) buying the carry currency (usd) and swaping it for Yen, then shorting AUD vs Yen knowing that the Aussie bond market is small and Illiquid, and using that to set F/X rates, and making the exchange profitable, even though they're losing a few basis points on the sell side.

Japan is the culprate along with some East Asian and Middle Eastern cohorts.
Click to expand...

www.zerohedge.com/news/2015-07-24/aussie-dollar-tests-long-term-trendline-china-contagion-spreads?page=1
Click to expand...

I'm not knowable in this area, but Australia being targeted should be of concern.

Just like Greece who are now a basket case, a relatively small economy guttered and profits made, Australia may fit the model of taking out our currency valuation and turn it into a profitable bet for those sharks.
 
You must log in or register to reply here.
Back
Top