# AUD vs. GBP exchange rate shift



## Evergreen (5 February 2010)

I would like to know if the forum as any words of wisdom of why the Aussie dollar as moved so much in the last 18 months. In the middle of 2008 it was 0.40 of the GBP but now it is 0.56?

The important question is- what factors does the forum think will it back to the 0.4GBP and when:confused?


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## Timmy (5 February 2010)

In a nutshell Evergreen, since the onset of the GFC the Australian economy has performed much, much better than the British economy.  This has led to a big disparity in interest rates between the two countries.

For example, the current BOE cash rate is 0.5% (http://www.bankofengland.co.uk/index.htm)
while the cash rate in AUstralia is 3.75% (http://www.rba.gov.au/).

There are other theories of exchange rate determination (see this for a quick overview: http://www.economywatch.com/economics-theory/theory-of-exchange-rate-determination.html) besides this asset model, which may offer up other explanations.

As to what and when brings the AUD down against the GBP:
What: the opposite starts to happen (UK economic recovery relative to Australia and reduction in the interest rate spread between the two countries)
When: no idea, sorry, haven't really thought about it.  Even if I did think about the when I don't think my view would end up being accurate anyway ... sorry.


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## noirua (2 March 2010)

A marked shift down in the value of the GBP on fears of an election tie that could bring in another weak Lib/Lab pact in May (probably May 6th) (Liberal Democrats and Labour). Rate falls to AUD0.601 ( inverse AUD1.662), a fall of 4 cents.


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## doctorj (2 March 2010)

noirua said:


> A marked shift down in the value of the GBP on fears of an election tie that could bring in another weak Lib/Lab pact in May (probably May 6th) (Liberal Democrats and Labour). Rate falls to AUD0.601 ( inverse AUD1.662), a fall of 4 cents.



Tell me about it.  Hopefully it recovers in time for the Ashes.


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## gooner (2 March 2010)

Good time to sell up in Aus and move to England.  You may even be able to afford something semi-decent, particularly outside of London.

Shame about the weather, food, lifestyle etc.  Though, they do have good football, particularly the might Arsenal.  And it is close to the attractions of Europe - Paris, ski fields, South of France, Italy etc


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## Fleeta (2 March 2010)

As an aussie living in London for the next 2 years, I am very close to pressing the trigger on selling aussie shares and bringing over to Pounds and sit on cash for next 2 years.....but then why would 1.66 be the floor hey....the economy in London is completely shot. As they say here, at least in Oz, your economy is based on real and tangible production. They have no manufacturing base and no resources here, its all built on a financial industry which has been nationalised...people here are desperate for a change of government. The contrarian in me wants to do it....any thoughts here?


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## noirua (7 March 2010)

View from the FT, an interview: hhht://wwww.ft.com/cms/893ac9c8-757e-11dc-b7cb-0000779fd29c.hdml


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## noirua (7 March 2010)

View from the FT, an interview with Hans Redeker of PNB Paribas: http://www.ft.com/cms/893ac9c8-757e-11dc-b7cb-0000779fd2ac.html


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