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

kramer said:
SilverDJ said:
sammysilver said:
Today I changed my super from shares to cash.
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I was contemplating doing similar. Take the capital loss (you can later offset) and ride this one out.
But it would be an emotional panic move.
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winning by not losing ? :D
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Yeah, but just because many are saying the market is going to crash doesn't mean it will.
Also, with a small number of individual stocks, you always run the risk of actually cashing out on stock that may, with hindsight, continue to perform well, crash or no crash.
 
This is the context of the 'sell everything' call by RBS.

So what would a big devaluation (20%) in the Yuan mean for AUD? I expect it will be a very big negative, and send us toward the 60c, since without China, ("giant stockpiles of most things China"), Australia only has a lot of prospective holes in the ground and a vast collection of overpriced housing markets to offer. BTW It also seals the fate of RBA interest rises this year.

Roberts' rationale is outlined in the six points below.

The baton of growth pre credit crunch was in the western world, and passed to Asia post credit crunch.
But this has been a debt fuelled build up.

We have come to the end of the willingness to build up such debt, especially as demand factors start to act against this build-up (e.g. especially demographics).

I showed in the Year Ahead two facts, either of which would lead a visitor from Mars to conclude, knowing nothing else, that we are in global recession:

Negative world trade growth
Negative world credit growth

This is a terrible cocktail. How consensus suggested a month ago that 2016 would be better than 2015 is a total mystery to me.
And there is no-one left to take up the baton of growth.

In a nutshell, after powering global growth in the years following the financial crisis almost entirely powered by a huge increase in indebtedness Asia is no longer in a position to address a slowdown in global growth.

In Roberts' view, there is no region to able to take Asia's place as the engine room for global growth. Not even the world's largest economy, the United States.

Amidst slowing global demand, heaping pressure on China's secondary industries that are already plagued by severe overcapacity, Roberts believes that strengthening in the Chinese renminbi over recent years courtesy of its peg to the US dollar exacerbated the slowdown in the Chinese economy, tightening financial conditions when it needed the exact opposite.

He suggests the renminbi needs to be "significantly lower", pointing to the chart below.

It tracks private capital flow in and out of China, shown in blue, against China's official FX reserves, shown in grey.

According to RBS analysis, an estimated $US170 billion of private capital left China in December, accelerating the pattern seen throughout the past two years.

Here's why Roberts believes that it's the "most important chart in the world right now".

It shows the extreme level of urgency for China to get its FX rate where it should be, toward a -20% depreciation. It has fallen -6.2% versus the USD since the summer when it started to move. I should repeat that everyone in RBS, from Sanjay Mathur our head of Asia economics who writes on China to David Simmonds our head of global FX research, and we in rates strategy/global macro, feel very high conviction in remaining on the 'more devaluation and quicker' side of the debate.

Should this weakening take place, allowing China a competitive advantage in pure price terms over their international rivals, it would leaving every corporate facing tougher conditions as prices for their goods and services become more less competitive.

Roberts suggests that such a scenario would be bad for global earnings, bad for global equities, bad for corporate balance sheets, bad for global credit spreads and bad for commodities.

That's why he has been telling investors worldwide that they need to sell everything.

http://www.businessinsider.com.au/h...rything-thinks-the-game-in-china-is-up-2016-1
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There is also the issue of what appears to be a collapse of the Baltic Dry Index: No ships at sea and no international trade happening.

I'm inclined to batten down the hatches.
 
Figures are in. The centrally controlled economy of China has confirmed that the figures are the way they'd like the figures to be. All better now. Buy. Buy. Buy.

After two months of sharp currency devaluation, the market was carefully watching last night's China trade data to see if the Yuan debasement had led to a positive trade outcome to the world's second largest economy, and as reported last night, it was not disappointed when China reported a December trade surplus of $60.09 billion from $54.1 billion in November, as a result of exports beating expectations and rising 2.3%, the first increase since June, while imports declined by just 4%, the smallest drop since 2014 despite China importing a record amount of oil, or 33.2 million tons, in December.

http://www.zerohedge.com/news/2016-...se-hard-landing-pushed-back-strong-trade-data
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But would such a devaluation directly effect the AUD?

By my thinking a weaker yuan means that Chinese products become more affordable from outside. If more affordable from outside demand goes up. Demand goes up from Chinese products the demand for Australian resources goes up with it. Resource prices goes up and stimulates the Australian economy (and the tax take). With all of the above (not withstanding the upward pressure positive terms of trade have on the AUD) the RBA has less need to lower rates, if anything it would put pressure on the upside of interest rates. Surely all of that puts upward pressure on the AUD.

All that garbage said, I get paid in USD. I want to see 50c AUD/USD for the next couple of years.
 
I foresee a brief moment of parity as the USD collapses.

Karma Aussie Come-on!
 
JulieW said:
There is also the issue of what appears to be a collapse of the Baltic Dry Index: No ships at sea and no international trade happening.

I'm inclined to batten down the hatches.
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I found this which helps!

The discussion in the Zero Hedge article Baltic Dry Crashes contains a blatant misinterpretation of the use of the AIS system. The author acknowledges that he is not a maritime expert, yet he attempts to use a maritime tracking system as evidence of his already determined conclusion. The reason the referenced map from marinetraffic.com shows no ships in the middle of the Atlantic is that there are no ports there with AIS receivers used to manage port traffic, the source of the data for this site. Using the filters for the map, you can remove ships anchored and in port and see that there are plenty of ships underway. While one might assume that the fact that using this filter removes a majority of ships from the map means that the majority of ships are not underway, this is incorrect. It means that the majority of ships near a port where they are picked up by an AIS receiver are not underway, probably because they are loading/unloading, which is what ships do in ports. I'm no expert on the Baltic Dry Index, but having spent 22 years in the Navy, AIS is something that I am quite familiar with, while this author is obviously not. Word to the wise: understand what the underlying data in any argument means. You can't just accept an author's interpretation of that data at face value. BMS
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Dropped below 69c:

12844_exr24_auus_en_2_12012016.gif
 
77c now.
Took a bit longer then i thought but back up it goes. I imagined it would go back up into the 80c range if RBA kept rates on hold in April and looks like its moving that way now.

Be interesting if useless Steven does nothing again in March. maybe back in the 90c range? I don't see how RBA would have thought our $ would stay low when everyone else is going into the negative rates zone.
 
leo25 said:
77c now.
Took a bit longer then i thought but back up it goes. I imagined it would go back up into the 80c range if RBA kept rates on hold in April and looks like its moving that way now.

Be interesting if useless Steven does nothing again in March. maybe back in the 90c range? I don't see how RBA would have thought our $ would stay low when everyone else is going into the negative rates zone.
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Oh yeah, this is interesting. If there's no change in interest rates then it will signal the market to power up with the AUD and we could see some solid strength in the currency.
 
leo25 said:
77c now.
Took a bit longer then i thought but back up it goes. I imagined it would go back up into the 80c range if RBA kept rates on hold in April and looks like its moving that way now.

Be interesting if useless Steven does nothing again in March. maybe back in the 90c range? I don't see how RBA would have thought our $ would stay low when everyone else is going into the negative rates zone.
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I recall at the start of the year someone started a thread about where people think USD to AUD will end by years end. About half were predicting 50 cent.
 
Skyrocket said:
leo25 said:
77c now.
Took a bit longer then i thought but back up it goes. I imagined it would go back up into the 80c range if RBA kept rates on hold in April and looks like its moving that way now.

Be interesting if useless Steven does nothing again in March. maybe back in the 90c range? I don't see how RBA would have thought our $ would stay low when everyone else is going into the negative rates zone.
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I recall at the start of the year someone started a thread about where people think USD to AUD will end by years end. About half were predicting 50 cent.
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Still several months to go.
 
silver kook said:
If going on holiday in 3 weeks would you lock in the US Dollar now or wait longer to exchange currency?
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There's been some extra meetings between Yellen and President Obama...something is cooking !!!

You could see the stock-market get spooked and a decent drop occurr or just the opposite...TheUS Fed might drop rates which could spur the market and USD.

Having said that, I think more and more people are realising that the US FED has lost the plot and all hell could break loose.

Here's what I'd do...Lock in half now and do lots of overtime to boost the kitty for that trip; then you can put ya feet up and...relax. :cool: :)
 
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