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Why is Australian dollar behaving like emerging market currency in 2018?

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helpme

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It shares the same "humiliation" as Indonesian rupiah and Indian rupee in 2018. This is quite unbelievable given that Australia is a developed country and extremely resilient economically. Its resilience can be seen by being recession-free for the past 25 years.

What happened in 2018?
 
helpme said:
What happened in 2018?
Click to expand...

Here's Morgan Stanley's explanation:
The RBA kept its policy rate unchanged at its latest meeting and the statement remained optimistic on the underlying outlook. That said, AUD remains one of our favourite shorts as we see further rate cuts still likely. The rising current account deficit driven by the income balance leaves Australia dependent on foreign funding flows, posing pressure on AUD amid the recent EM-led challenging funding sentiment. In addition, with commodity prices continuing to decline and housing prices likely to fall further, we see room for AUD to weaken further and continue to recommend short AUD against GBP, USD and JPY positions.
Click to expand...

More here: https://www.businessinsider.com.au/...lia-dollar-rba-rate-cut-morgan-stanley-2018-9
 
Well you would have to agree with that prognosis greggles. :xyxthumbs

We want to have a first World currency, with a third World economy, electricity unreliable and expensive, wages high output low, debt high and becoming more unaffordable.
Sounds like a slide to me.:roflmao:
 
In 2016, the Australian dollar was the fifth most traded currency in the world, accounting for 6.9% of the world's daily share (down from 8.6% in 2013).[4] It trades in the world foreign exchange markets behind the US dollar, the euro, the yen and the pound sterling.[5] The Australian dollar is popular with currency traders, because of the comparatively high interest rates in Australia, the relative freedom of the foreign exchange market from government intervention, the general stability of Australia's economy and political system, and the prevailing view that the Australian dollar offers diversification benefits in a portfolio containing the major world currencies, especially because of its greater exposure to Asian economies and the commodities cycle.[6] The currency is commonly referred to by foreign-exchange traders as the "Aussie dollar".
https://en.wikipedia.org/wiki/Australian_dollar

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Due to being such a traded currency there is a need for greater stability. Not too long ago it was par to the United States Dollar and then it was nearly two to US currency. Unfortunately from outside Australia it is also seen as a gamble. Some wait for weakness as this signals greater profitability for mining stocks and at a certain point the world piles in. Up goes the Aussie until eventually the world piles out again.
From this there is a need to have a fixed value against the US dollar. However, there is a need for Australia to have vast gold reserves to defend the currency at times and a flexible approach. That can only happen if a law is passed that makes gold miners have to give first option to buy gold to the Australian Government. This would also be at a discount to the market price that might annoy some miners, and flexible royalties.
 
noirua said:
In 2016, the Australian dollar was the fifth most traded currency in the world, accounting for 6.9% of the world's daily share (down from 8.6% in 2013).[4] It trades in the world foreign exchange markets behind the US dollar, the euro, the yen and the pound sterling.[5] The Australian dollar is popular with currency traders, because of the comparatively high interest rates in Australia, the relative freedom of the foreign exchange market from government intervention, the general stability of Australia's economy and political system, and the prevailing view that the Australian dollar offers diversification benefits in a portfolio containing the major world currencies, especially because of its greater exposure to Asian economies and the commodities cycle.[6] The currency is commonly referred to by foreign-exchange traders as the "Aussie dollar".
https://en.wikipedia.org/wiki/Australian_dollar

---

Due to being such a traded currency there is a need for greater stability. Not too long ago it was par to the United States Dollar and then it was nearly two to US currency. Unfortunately from outside Australia it is also seen as a gamble. Some wait for weakness as this signals greater profitability for mining stocks and at a certain point the world piles in. Up goes the Aussie until eventually the world piles out again.
From this there is a need to have a fixed value against the US dollar. However, there is a need for Australia to have vast gold reserves to defend the currency at times and a flexible approach. That can only happen if a law is passed that makes gold miners have to give first option to buy gold to the Australian Government. This would also be at a discount to the market price that might annoy some miners, and flexible royalties.
Click to expand...

Wow... I need your level of knowledge. Thanks for that
 
helpme said:
735x-1.jpg

It shares the same "humiliation" as Indonesian rupiah and Indian rupee in 2018. This is quite unbelievable given that Australia is a developed country and extremely resilient economically. Its resilience can be seen by being recession-free for the past 25 years.

What happened in 2018?
Click to expand...

A bit of an overreaction. The RBA was jawboning weakness into the AUD for the longest time. It has not lost "status".
 
Australia is a net importer of capital and has been since the establishment of the colony in New South Wales. It is trapped with national capital and current account characteristic of a developing country with little prospect of ever maturing into an economy that might pay it off.
 
tinhat said:
Australia is a net importer of capital and has been since the establishment of the colony in New South Wales. It is trapped with national capital and current account characteristic of a developing country with little prospect of ever maturing into an economy that might pay it off.
Click to expand...

Probably because we as a Country, own very little of the productive side of the economy, we work for Companies that are probably overseas majority owned.
We pay taxes so the Government can supply us services and welfare, we borrow money from a Bank to buy a house, which the Bank has borrowed from overseas to lend to us.
That is where a tax on volume of raw materials exported, is the only way we can inject outside money into our economy.
We have nothing to sell to overseas buyers, other than raw materials, due to our fortunate position of having one of the lowest removal costs in the World.
When that is depleted it is game over. IMO
Until then we are a First World economy, with all the living standard trappings that go with it, until then we can pander to the "what about me" mentality.
 
PZ99 said:
Reserve Bank says rate cuts and QE possible as Australian housing enters 'uncharted territory'
Click to expand...
Do others share my thoughts that this is a "signal" that the RBA is likely going to bring about a devaluation of the AUD relative to other currencies by means of interest rates and/or outright QE?

I'm thinking terms of the comments being effectively a warning for those paying attention and intended as such?

Or is that thinking getting too far into tin foil hat wearing territory?
 
Smurf1976 said:
Do others share my thoughts that this is a "signal" that the RBA is likely going to bring about a devaluation of the AUD relative to other currencies by means of interest rates and/or outright QE?

I'm thinking terms of the comments being effectively a warning for those paying attention and intended as such?

Or is that thinking getting too far into tin foil hat wearing territory?
Click to expand...

@Smurf1976 @sptrawler the next looming problem for Australia is a credit squeeze - It’s in our best interest for Banks to keep lending flowing. The Banks at the moment have a reduced appetite to lend having consequent effects on the Australian economy.

EXAMPLE 1
Shane Oliver - 21st November 2018
AMP Capital chief economist Shane Oliver said there was a risk lending was going from “too easy to too tight” and it was significant that the RBA had identified it, suggesting a rate rise was a long way off. “But the last thing we want is a situation where banks don’t want to lend to reasonable borrowers because they feel they’ll be blamed when they go wrong,”

EXAMPLE 2
RBA - 6th December 2018
Dr Debelle from the RBA said a key lesson from the global financial crisis was that economies needed a steady flow of debt to flourish which demonstrated the critical importance of keeping the lending flowing.

EXAMPLE 3
ANZ Bank - 1st November 2018
The ANZ Bank doesn't want to lend to reasonable borrowers (SMSF) as demonstrated by an exact extract from ANZ income verification policy. (private internal use only - not to be made public)

*Note: Income derived from a Self-Managed Super Fund (SMSF) is not acceptable.

The Income verification clause was recently written into ANZ lending criteria..

Disclaimer
The other 3 pillars of banking have not adopted this policy (yet)

Skate.
 
tinhat said:
Which banks are you looking at?
Click to expand...
NAB is my chosen poison at the moment :)

sptrawler said:
Even the RBA is worried about the next election. Lol
It could end up with the richest Government, to precise over a recession.
Click to expand...
I'm seeing Labor winning elections coinciding with economic meltdowns as insider trading.

Same cycle different decade.

Rupert Murdoch did say he could make money from a one term Shorten Govt :D

Smurf1976 said:
Do others share my thoughts that this is a "signal" that the RBA is likely going to bring about a devaluation of the AUD relative to other currencies by means of interest rates and/or outright QE?

I'm thinking terms of the comments being effectively a warning for those paying attention and intended as such?

Or is that thinking getting too far into tin foil hat wearing territory?
Click to expand...
I'm seeing a budget surplus getting spent as helicopter money on first home buyers' grants to stabilise the housing market. Australia is in a precarious position because our rates are so low they can no longer defend the economy as in the past. So it's going to come down to Govt spending. I personally rule out the likelihood of QE :)
 

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