Effect of low Australian dollar on the stock market?

[benjamin7]

hey people

with the new projected "40c" Australian dollar, im curious to know what the historical effects of a low australian dollar does the the stock market? and how yoou think it will effect the stock market?

 

[DeepState]

hey people

with the new projected "40c" Australian dollar, im curious to know what the historical effects of a low australian dollar does the the stock market? and how yoou think it will effect the stock market?

Need to ask why the AUD will drop to 40c to answer your question on how it will impact the Aust market. In isolation, it will increase AUD Earnings per share for offshore earnings and thus increase the present value of these...lifting the market. It also improves export competitiveness but makes goods with high import content expensive. All in all, a positive for the market when looked at in isolation.

However, the actual answer will depend on why it happened. If China falls through the floor, equities are going down. If the AUD falls because the local economy is extremely weak and the RBA has to cut rates...then the market is going down. If it falls because growth in the US is going bananas and the Fed raises rates strongly but productivity gains are solid, then the markets are going to go up.

Vimal Gor has made a big splash with his statement. He has been very bearish on bonds for a long time.

 

[TheBigKangaroo]

Need to ask why the AUD will drop to 40c to answer your question on how it will impact the Aust market. In isolation, it will increase AUD Earnings per share for offshore earnings and thus increase the present value of these...lifting the market. It also improves export competitiveness but makes goods with high import content expensive. All in all, a positive for the market when looked at in isolation.

However, the actual answer will depend on why it happened. If China falls through the floor, equities are going down. If the AUD falls because the local economy is extremely weak and the RBA has to cut rates...then the market is going down. If it falls because growth in the US is going bananas and the Fed raises rates strongly but productivity gains are solid, then the markets are going to go up.

Vimal Gor has made a big splash with his statement. He has been very bearish on bonds for a long time.

Hi, could you please direct me to [somewhere] so I can learn how all of the elements in the economy impact the AUD and any currencies actually. Thanks

 

[CanOz]

Jeepers dude, i'm thinking a degree in Economics....If not interested in that i suggest you open an FX account and trade micros whilst scouring the internet for economics 101 stuff.

 

[TheBigKangaroo]

Jeepers dude, i'm thinking a degree in Economics....If not interested in that i suggest you open an FX account and trade micros whilst scouring the internet for economics 101 stuff.

I have a Degree in Commerce and did do economics in first year of degree. That was 35 years ago and as I did not work in an economics field and have just started looking at Trading FX, forgive me but I would like some review information to get just an adequate familiarization of how the economies 'hang together'. If you object to my post ... well ... stiff.

 

[CanOz]

I have a Degree in Commerce and did do economics in first year of degree. That was 35 years ago and as I did not work in an economics field and have just started looking at Trading FX, forgive me but I would like some review information to get just an adequate familiarization of how the economies 'hang together'. If you object to my post ... well ... stiff.

No, not at all BigRoo, i was just a little overwhelmed by the scale of the request. Since you're interested though, lets start an open discussion on the subject of things that effect the AUD, there are more than enough people here currently lurking to give you some insight.

I'll start things off with the FACT that the US is raising rates. The Banks here have to tap money markets there in order to get funds to loan, finance their debt etc., so those borrowing costs and that risk is priced into the AUD. The AUD is not an emerging market but yet we do have some risks and those risks are being priced in along with a general risk off in the equity markets globally (opposite of safe haven US Treasuries bought in US Dollars).

This could be exacerbated by the general risk to global trade brought about by the one and only Donald Trump.

Add to that the rising risks of mortgage defaults being priced into the AUD....then add to that the technical picture which tells us that .60 is a real possibility....

 

[TheBigKangaroo]

No, not at all BigRoo, i was just a little overwhelmed by the scale of the request. Since you're interested though, lets start an open discussion on the subject of things that effect the AUD, there are more than enough people here currently lurking to give you some insight.

I'll start things off with the FACT that the US is raising rates. The Banks here have to tap money markets there in order to get funds to loan, finance their debt etc., so those borrowing costs and that risk is priced into the AUD. The AUD is not an emerging market but yet we do have some risks and those risks are being priced in along with a general risk off in the equity markets globally (opposite of safe haven US Treasuries bought in US Dollars).

This could be exacerbated by the general risk to global trade brought about by the one and only Donald Trump.

Add to that the rising risks of mortgage defaults being priced into the AUD....then add to that the technical picture which tells us that .60 is a real possibility....

View attachment 89718

Ok CanOz..thank you for your reply. I accept that it was a silly question by virtue of it breadth. Notwithstanding the breadth, I remember for uni just how much of economics is so subjective and certainly not scientific. It is about the only profession where you will struggle to get 2 economists in a room to agree. For "non professions", marriage wins this race hands down!! I have since found a really cool site that well and truly fills in all of the gaps I was referring to and even for people who have no understanding of economics, it really is well worth a read. https://www.economicshelp.org/economics-a-z/
I hope this helps others.
Regards

BigRoo

 

[Triple B]

I have found investopedia a good site. use it often. It takes a while to build a big picture.
ie bonds/interest rates . how interest rate affect currencies, central bank policies and economic indicators.
I look at these purely for education . Almost irrelevant to very short term fx trading.

 

[noirua]

Australia jobless rate dives to 6-1/2-year low in statistical quirk
https://www.reuters.com/article/us-...2-year-low-in-statistical-quirk-idUSKCN1MS0FV

Financial markets also had their doubts, with the Aussie dollar edging just 20 pips higher to $0.7121 AUD=D3 and interest rates futures <0#YIB:> showing scant chance of a rate hike for months to come.

The RBA has held rates at 1.5 percent since mid-2016 and has shown no inclination to move anytime soon.
--------

Maybe this uncertain picture and stubborn attitude of the RBA has seen a gradual decline of the Aussie against the greenback. Loss of confidence in Australia's present government hasn't helped.
The RBA might have seen a picture of lack of profits in the mining industry led by low iron ore prices. A sliding AUD is all round good news, overall, for miners.

 

[Ann]

Hi, could you please direct me to [somewhere] so I can learn how all of the elements in the economy impact the AUD and any currencies actually. Thanks

G'day TBK, over the years I have noticed certain correlations between indices, commodities and currencies. If the US market falls, gold rises, if gold rises the Aussie dollar also rises, the $US falls. These are just my observations and there is no guarantee it will always be like this of course!

 

[Triple B]

If the US market falls, gold rises, if gold rises the Aussie dollar also rises, the $US falls

Yes Gold is priced against the USD the Fed holds the largest reserve of gold in the world. It is their hedge against the USD going bust. 8000 tons i believe. Gold Is Australias 3rd largest commodity export after iron ore and coal so the gold price is pretty important I suspect.