What's your prediction on the Australian Dollar?

Sprucegoose

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Really depends on the dollar and RMB. We are looking at a changed economic outlook like we have never before modelled.
Traditionally you could forecast an FX based on forward interest rates (central rates). These days ?
 

RAM

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I've long given up on trying to understand the real impact of new "unconventional" monetary policy tools of QE and negative rates, but here's the quote from Lowe:

“When the pandemic was at its worst and there were severe restrictions on activity, we judged that there was little to be gained from further monetary easing,” he said.

“As the economy opens up, though, it is reasonable to expect that further monetary easing would get more traction than was the case earlier.”
When short term interest rates go below the rate of inflation, without fail, they cease to increase economic activity & instead achieve the opposite result. That failed policy rewards profligate borrowers/gamblers and penalises responsible companies/people. Savings become a losing proposition (especially as interest is taxed) with the cost of living rising by a multiple of your after-tax income.

So people who have saved up to live off later - now find they have to cut back. Consider the 8% available in Australia to savers back in the early 2000s - today the general savings interest rate is around 1/10 (if extremely active in pursuing introductory offers) to 1/40th if not. Expected annual spending in retirement from interest income has dropped a minimum of 90% meanwhile shinky operators & developers etc can leverage up to pay themselves massive amounts, declare the company bankrupt when their latest Ponzi scheme fails - and move on to the next one.

Central Banks around the world have been shown up. Their use-by date has come & gone.

The Bank of Japan is fast approaching the end of its 3rd decade of zero interest rates.

The result, an economy that is un-officially bankrupt. Virtually zero real growth in 20 years & now has so much Central Govt debt (alone) that Japanese interest rates can never rise as if they went up by 2.00% it would require the interest bill would equate to the total Federal Govt spending currently.

Residential property prices in Japan are still around 70% below their peaks & all Japanese banks are insolvent but due to the global implications - the IMF & World Bank agreed to look the other way since 1994. Back then Japan was the world's second largest economy.

So the rest of the Central Bank community saw how good a result the zero interest rates achieved - and still did the same. I suppose when there's nothing else you know how to do then Central Banks (like the RBA) rely on the spin doctors to justify their existence & salaries.

When the interest rate (cost of money) for 10 Yr German Govt bonds is below zero, way below actually at - 0.59% = things are really bad.

After all, people are happy to give their money to the German Govt for ten years and only get back $94 at the end whilst the cost of living keeps rising.

Within a couple of years of the BoJ Zero Interest Rate Policy (ZIRP) being underway - a very well respected strategist summed it up as effective as pushing on a piece of string to move a B747.
 

kpc

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The cruel irony as the AUD approaches USD 0.76 and we can't travel OS. Maybe can do some online shopping to take advantage of this....
 

cove

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It will be a while as travel to London and Los Angeles won’t be a thing. Had to Fedex some documents from Los Angeles and that took three weeks for the premium service. Looks like 0.76 might hold despite our Reserve Bank trying to stop the rise.
 

ethernet

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For a currency to go down, others must go up. The RBA wrong footed when it lowered interest rates in one hit, knowing that iron ore was strong and that the govt had no effective policy other than motherhood statements. (Write downs and depreciation do not create bang-for-buck jobs). Presently the aud is not going up, but rather the American dollar down - I think we have even lost ground against the Kiwi and the pomquid.
I have read the Eurobank is worried that money from Italy and Spain have poured into Germany, needing to re-balance things.... Meanwhile China is on a construction tear, and it will not do to skimp on steel reinforcing. LPG and oil has gone up, so China's coal freeze is mush more costly.
I am convinced UK's covid strain will spread, leading to Europe still swimming in it. Thus short term aud should settle below 78 cents, even with RBA interventions.
 

VPS

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For a currency to go down, others must go up. The RBA wrong footed when it lowered interest rates in one hit, knowing that iron ore was strong and that the govt had no effective policy other than motherhood statements. (Write downs and depreciation do not create bang-for-buck jobs). Presently the aud is not going up, but rather the American dollar down - I think we have even lost ground against the Kiwi and the pomquid.
I have read the Eurobank is worried that money from Italy and Spain have poured into Germany, needing to re-balance things.... Meanwhile China is on a construction tear, and it will not do to skimp on steel reinforcing. LPG and oil has gone up, so China's coal freeze is mush more costly.
I am convinced UK's covid strain will spread, leading to Europe still swimming in it. Thus short term aud should settle below 78 cents, even with RBA interventions.

The UK pound is dropping against the $AUD. I had a substantial sum of pounds to bring over and missed the boat in April.

1608606931857.png
 

CMA222

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Interesting times for the A$. Given its current rate I was thinking of buying a couple of foreign currencies I need. One will be around A$125K but I am watching the volatility and am not confident which way the US$ will move once Trump is finally moved on or whether he will do more damage before he departs. The increased confidence (?) might move the US$ up and the A$ down but the Covid-19 mess may leave it stable or swing it down. Fun times !
 
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RAM

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For a currency to go down, others must go up. The RBA wrong footed when it lowered interest rates in one hit, knowing that iron ore was strong and that the govt had no effective policy other than motherhood statements. (Write downs and depreciation do not create bang-for-buck jobs). Presently the aud is not going up, but rather the American dollar down - I think we have even lost ground against the Kiwi and the pomquid.
I have read the Eurobank is worried that money from Italy and Spain have poured into Germany, needing to re-balance things.... Meanwhile China is on a construction tear, and it will not do to skimp on steel reinforcing. LPG and oil has gone up, so China's coal freeze is mush more costly.
I am convinced UK's covid strain will spread, leading to Europe still swimming in it. Thus short term aud should settle below 78 cents, even with RBA interventions.
As the majors are creating more money by the push of a button (Central Bank buying Govt debt using new currency) we're on a race to the bottom a bit like the 1920s. Everyone wants to debase their currency to get 'growth' from their exports being cheaper & import substitution.

New economic theories to be developed - go back less than a decade & creating money from thin air was looked on as a tinpot dictator's modus operandi (various African or South American countries). Now it is the go-to choice of the 'establishment' Central Bankers as everythinng else they've done has failed - a bit like the definition of madness - keep doing the same thing and expect a different outcome. Japan has been failing to revive their economy for nearly thre decades now, & despite negative interest rates their property market is at early to mid 1980s levels for many sectors.

With Scomo et al not spending as per capita as the US, Europe, Japan - then AUD has a strong tide to fight against. UK has not been quite so generous with recent spending announcements, nor NZ.

What may keep the can-kicking going on for longer is that of the Top 20 Global economies or economic groups eg EU - all 20 are doing this including our good friend China. Toss in negative 10 year interest rates in the EU and elsewhere are you could be forgiven for thinking you're in the midst of an Austin Power's movie!

And we all know how they turn out...
 

serfty

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Austin Power's movie!

And we all know how they turn out..
The Good Guys win? Yeah Baby!

 

Flashback

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For a currency to go down, others must go up. The RBA wrong footed when it lowered interest rates in one hit, knowing that iron ore was strong and that the govt had no effective policy other than motherhood statements. (Write downs and depreciation do not create bang-for-buck jobs). Presently the aud is not going up, but rather the American dollar down - I think we have even lost ground against the Kiwi and the pomquid.
I have read the Eurobank is worried that money from Italy and Spain have poured into Germany, needing to re-balance things.... Meanwhile China is on a construction tear, and it will not do to skimp on steel reinforcing. LPG and oil has gone up, so China's coal freeze is mush more costly.
I am convinced UK's covid strain will spread, leading to Europe still swimming in it. Thus short term aud should settle below 78 cents, even with RBA interventions.

Firstly, it's not just at a UK strain. It's in 60 countries at least already and was detected as early as September. The UK has been battered though as BoJo the clown made a big song and dance about it on the weekend.

Secondly, it's more so that the USD has fallen as even the UK has gained a decent whack against it to as we continue to drop against the EUR due to Brexit...
 

Myrna

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We have been running down (fast) our £ savings to stay in the UK until we can return to Sydney. It looks like in early 2021 we will need to bring the A$ savings to the UK for living expenses, as it does not look like we will be able to return to Sydney for another year the ways things are heading :( So the weakness of the £ against the A$ will help us in this.
 

cove

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Qatar may be the way to get home @Myrna.
Meanwhile we are not getting to Sydney for New Year.
Just read The World email. Life on a ship could work but maybe not during this pandemic.
 

Myrna

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Qatar may be the way to get home @Myrna.
Meanwhile we are not getting to Sydney for New Year.
Just read The World email. Life on a ship could work but maybe not during this pandemic.
We will think about Qatar - but hubby is very wary of the 14 mandatory quarantine in a locked hotel room :(
Was going to ask if you & Mrs cove would go to your Sydney place as planned - because of the new lockdown there.
When you own a slice of The World, don't forget to get us home :) Just kidding, no cruise during this pandemic - even on The World.
 

cove

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We still have the outgoings for London and Los Angeles so having the $AUD move up against yje US Dollar and the British Pound is a help. Hope it steadies off but no one knows.
Now we have to make our 3 balconies and 2 front doors in London fire compliant due to rule changes for our flat.
In Los Angeles we pay about 1% property tax so we need some US dollars each year.
Mrscove has been baking Christmas cakes seeing she is resigned to travelling nowhere.
14 day quarantine....yes we did that once so far at home and our neighbours and local IGA and fruit shop were helpful.
 

Myrna

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We still have the outgoings for London and Los Angeles so having the $AUD move up against yje US Dollar and the British Pound is a help. Hope it steadies off but no one knows.
Now we have to make our 3 balconies and 2 front doors in London fire compliant due to rule changes for our flat.
In Los Angeles we pay about 1% property tax so we need some US dollars each year.
Mrscove has been baking Christmas cakes seeing she is resigned to travelling nowhere.
14 day quarantine....yes we did that once so far at home and our neighbours and local IGA and fruit shop were helpful.
We miss Mrs cove Christmas cake this year, but she did promise to save one for us - when we see you again. This may mean at the end of 2021, in this case, we will have two cakes waiting for us :) :)
We don't mind quarantine / self iso at home (just have to kick a certain family member out while we are under quarantine), but not in a locked hotel room.
 

cove

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It is crayfish city at the moment in Australia as the chinese market has been stopped. Has not affected the $AUD.
I will tell Mrscove to warehouse the Christmas cakes for you.
If you get a hotel room with a balcony i think that would be ok.
Just received a 100% bonus offer from American Airlines and that is how we came home from London in March on Qatar.
 

Myrna

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It is crayfish city at the moment in Australia as the chinese market has been stopped. Has not affected the $AUD.
I will tell Mrscove to warehouse the Christmas cakes for you.
If you get a hotel room with a balcony i think that would be ok.
Just received a 100% bonus offer from American Airlines and that is how we came home from London in March on Qatar.
Oh, am dreaming of lobster for Christmas lunch in the backyard. However, niece said she could not find any lobster in supermarkets near us - sold out! In past years, hubby would drive me to Sydney Fish Market around midnight to buy lobsters and fresh fish for the family Christmas lunch / dinner.
Saw the email from AA too. Will have to buy some to top up hubby's account for one-way flights home in 2021 - like you did in March, just before the lockdown.
 

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