# The AUD Movement...



## haunting (4 August 2009)

FYI. This is someone else's opinion...



> _AUD/USD pushed above its high of 0.8263 seen in early June yesterday. Apart
> from this episode, there were only four episodes when AUD/USD appreciated above
> 0.80 after the mid-1980s. They were 0.8960 in February 1989, 0.8475 in August 1990,
> 0.8215 in December 1996 and 0.9849 in July 2008. In early June, AUD/USD rose
> ...




** don't forget the AUD/JPY carry trade, I believe it is still on...


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## haunting (7 August 2009)

FYI...



> _The August 12 FOMC meeting is the key event for bond markets next week.
> Similar to the June 24 FOMC meeting the Fed Funds target is virtually certain to
> remain at 0-0.25% and the message in the post meeting policy statement will at
> best be one of very cautious optimism as downside risks to growth and risks of
> ...


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## haunting (8 August 2009)

Good news first - the DXY has a bounce last night, up by .95 to 78.9 - which is what the doctor's ordered. Next is to see if it can rebound to 80 or higher to remove the escalating undesirable "inversing" effect on commodities and on other major currencies threatening the economic recovery of the respective issuing country. This is probably the hope of every country that relies on the US$... including Australia.

... already the rise of the AUD is causing a not so small headache for Swan and the RBA, as pointed out by the economist in CBA this morning:



> _Rising AUD
> hurts trade balance
> It’s great news to see that Australia’s trade deficit shrank in June
> to just $441m. However, that is likely to be as good as it gets over
> ...




** hence Swan is talking about keeping the stimulus for a while and it probably won't be too much of an exaggeration to say the next half's numbers would be more important than the one just reported since most of the real negative factors only kicked in after June. Let's wait and see...


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## MRC & Co (8 August 2009)

All very interesting Haunting.  

Thx for the posts.  

The markets appear very very confused at the moment.  

USD/equity correlation broke down, but oil/gold are stuck in the middle, undecided on what is the important factor driving them and hence, haven't latched onto a correlation as of yet.

I think this is an important juncture for the markets.  The next few days should provide some fantastic trade ideas.


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## haunting (8 August 2009)

Geithner asks Congress for higher US debt limit



> _US Treasury Secretary Timothy Geithner formally requested that Congress raise the $US12.1 trillion ($A14.44 trillion) statutory debt limit, saying that it could be breached as early as mid-October.
> 
> "It is critically important that Congress act before the limit is reached so that citizens and investors here and around the world can remain confident that the United States will always meet its obligations," Geithner said in a letter to Senate Majority Leader Harry Reid that was obtained by Reuters... _




** whilst the market is happily rallying away, the economists in general are not too sanguine about the so called recovery because of the debt fuelled stimulus induced nature of the "recovery". So far the major negatives they have pointed out and those that I can recall are:

1) a jobless recovery, as cautioned by a Fed governor, which means expect more housing problem when the jobless start to default on their repayment. In addition, don't expect consumption to pick up in a hurry, and with it representing 70% of the economic activities, no one really knows if this recovery will mean the end of bad times or the beginning of growth. 

2) next is the taxes - another noted economist is saying with Obama piling on taxes on the rich and probably into the middle class - it will act as an economic damper and will slow down the economic activities. Combining with the change of American spending habit, where they have now become active savers... the economic multiplier effect in reverse gear will surely make this recovery look like an uphill climb

3) the underlying bad assets buried within the balance sheets of the banks will make sure they are very careful and difficult with their lending, making finance costly and hard to obtain to the medium to small businesses, thereby cutting off the lifeblood to the main job creators in the economy...

Enough... I am feeling depressed already after three points, and god know how many more yet to be raised?

But then who cares - the market is hot, and that's the only thing that matters...


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## MRC & Co (8 August 2009)

One positive, is a housing market stabilization, would see home owners more upbeat on their equity and could cause a fall in savings and increase in consumption, even if just at the margin.  

Definately tough times for the US to get back to the level it was at with all you have already mentioned, but I'm really starting to doubt the double dip hypothesis.


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## haunting (9 August 2009)

MRC,

It all depends on how the second "dip" will turn out. Right now many bears are hoping to see a second bottom or further correction in the market - with some expecting a level as low as 2400 in XJO - I wouldn't want to laugh at them or rule that possibility out; but based on logic and as pointed out in one of my posts, to get another March low of 3200 or lower to 2400, the global investment climate has to match, or get much worse than the climate back in March this year where all the extreme fear factors are present to drive investors into panicky mindless selling.

At this point, with credit freeze out of the way and with many signs showing negative economic activities are decelerating, frankly the chance of an equal low, a double bottom formed  in the market index is quite remote. To see a 2400 plunge in my view is next to impossible unless there's a discovery of a meteor the size of Manhattan is going to hit the earth within one month...

But what about the potential of a double dip with a higher low, ie, the scenario that the economy stabilises for a couple of quarters and then got caught up by the revelation that the bad assets buried in the banks are rearing their ugly heads again, causing another round of write down by the banks with credit freezing one more time and more rescues have to be provided by the Feds?

This is a very likely scenario and one that I wouldn't want to rule out, that is, a double dip recession, but with a lesser degree of fear and lesser negative impact on the overall economic activities. Market wise, that would probably translate into a distorted double bottom in the index (XJO) with a higher low formed somewhere at or near 34-3500 level, due to the fact that this time around many investors would see that second dip to be a buying opportunity rather than a serious calamity.

Cheers.


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## MRC & Co (9 August 2009)

Yes, sorry, I mean I doubt the W shape recovery and a double bottom, but definately a higher low is possible.


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## haunting (11 August 2009)

> _Currencies: For the first time in a long while, the USD appreciated last Friday when
> US stocks reacted positively to better US jobs data. Even so, yesterday’s session in
> Asia and US suggested that market will continue to struggle to abandon its postcrisis
> habit of seeking USD as a safe haven during risk aversion, and seeking carry
> ...




** note this comment: _the risk of a portfolio adjustment between emerging markets and the US in favor of the latter cannot be discounted._


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## MRC & Co (11 August 2009)

lol, that is basically the entire view I am taking on this current situaiton.

Where did you get that write-up from?  Very interesting to see the exact same comments.  Particularly the portfolio weighting adjustment, a perfect time to get long "Asia" as a spread against short the West.


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## haunting (11 August 2009)

A friend sent through email from Asia (DBS Bank)...


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## MRC & Co (12 August 2009)

Cheers for posting it, very good email.  Are these something regular he does?  It was a nice, succinct (spelling), summary.

I recieve maybe 50 emails a day from various IBs, funds etc, but none are quite as short and to the point!  Usually a lot of junk in between unfortunately.


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## haunting (12 August 2009)

Will China sabotage the Australian dollar?

** a very good interview with plenty of info confirming what has been discussed thus far. Other than the stupid title, which generally reflects the negative bias of the journo with everything to do with China, the info provided by Hans has been most insightful and would help to provide a better understanding of the current speculative and liquidity driven AUD. 

Worth a read.

The main points:



> _    * To understand the future direction of the Australian dollar, we need to look at the economic situation developing in China
> * There is a good possibility of a set-back in the Australian dollar
> * While Australia's economy, and particularly our banking sector, are healthier than other countries, its reliance on Asian trading partners is an issue
> * There is a paradigm shift taking place in relation to the US dollar, which is seeing increasing demand against the euro and the yen
> ...




The SSE chart from Yahoo


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## haunting (12 August 2009)

More on FOMC...



> _Fed: The Fed meets tomorrow on policy. Policy rates will remain at 0% - 0.25% and
> the Fed will again say it expects rates to remain “exceptionally low … for an
> extended period of time”. There are two reasons for this: one practical, the other
> driven by its mandate (and perhaps by politics). In practical terms, the Fed has to say
> ...


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## haunting (12 August 2009)

MRC,

There are other Asian market stuffs which in my view are quite irrelevant to the Aussie markets. What you are reading in somewhere had been vetted by me...


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## MRC & Co (12 August 2009)

Ok, cheers.


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## haunting (13 August 2009)

More on FOMC...



> _US: 10Y Treasury yields rose 5bps to 3.71% yesterday after a disappointing $23
> billion 10Y auction and the announcement from the Fed that it will slow down the
> pace of Treasury purchases. In the post-meeting statement the central bank said:
> “the Federal Reserve is in the process of buying $300 billion of Treasury securities. To
> ...


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## haunting (14 August 2009)

RBA May Raise Key Rate From ‘Emergency Setting’ 

** this would encourage more AUD carry trades, the additional liquidity should provide more fuel to the local rally, I think.


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## MRC & Co (14 August 2009)

More carry trades, but at the same time, how much of this is already priced into the AUD?

This would also diminish local liquidity, which would be a negative on equities.....


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## haunting (14 August 2009)

On the contrary I see it will help the local equity market esp with regard to some of the higher divi yielding stocks.


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## MRC & Co (15 August 2009)

Looks like it was priced into the AUD already, thought so by what is priced into the bond markets already.


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## rederob (25 February 2021)

How long to parity?


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