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Discussion in 'Money & Finance' started by John From Moneycorp, Jan 23, 2013.

  1. John From Moneycorp

    John From Moneycorp Foreign Exchange Expert

    Please see a monthly review below on the Australian dollar – attention turns to the Reserve Bank of Australia and their interest rate decision tomorrow.

    July was another awful month for the Australian dollar. In June it came last among the ten most actively traded currencies and in July it was at the bottom of the table again. The losses last month were less severe though: In June the Aussie fell by 5% against the pound and by 5.5% against the euro while in July those declines were "only" 2.5% and 4%. Since the beginning of the year the Australian dollar has fallen by 9% against the pound and by 16.5% against the euro.

    In most countries the authorities would be devastated to see their currency trashed like that. But the Australian government and the Reserve Bank of Australia have maintained for ages that their dollar is too strong. Even after this year's fall they apparently still feel the same way. RBA governor Glenn Stevens said in late July "It would not be a major surprise if a further decline occurred over time." To help it on its way, the governor also hinted at an interest rate cut in the pipeline, which would further diminish the attraction of the AUD to investors.

    And the background for the Aussie dollar is still a difficult one. Nearly a third of Australia's exports - mainly iron ore and coal for making steel - go to China. Chinese demand has fallen as the recession and its after-shocks have led to dwindling demand for the export products that China builds with that steel. Falling demand for coal and iron ore means lower prices for them, so Australia is exporting less stuff and having to sell it more cheaply. That, in turn, means less demand for the Australian dollars that customers use to pay for the country's exports.

    It is not a new situation but it is one that continues to weigh on the Aussie dollar. The end of the mining boom means that Australia will need new industries to fill the economic gaps, not least the tax gap. In the next four years, taxes paid by companies to the government are expected to fall by A$10bn. That means either lower government spending or increased taxes elsewhere. The first of these will be a tax on bank deposits, which starts in January 2016.

    There is no consensus about what would be a "fair" value for the Australian dollar but there is general agreement - and not just in Canberra - that it is somewhat lower than its current level. From its highs four months ago the currency has fallen by 14% against the pound and by 22% against the euro. That might sound a lot but the Aussie still has a way to fall if (and it is "if") it is to return to its pre-global-financial-crisis levels.
     
  2. John From Moneycorp

    John From Moneycorp Foreign Exchange Expert

    The Reserve Bank of Australia cut its policy interest rate on Tuesday to an all-time low of 2.5%

    The Reserve Bank of Australia's (RBA) decision to cut its Cash Rate from 2.75% to 2.5% was widely anticipated – in their statement, the RBA's failure to hint at a subsequent cut, and the tone and sentiment of the comments from RBA governor Glenn Stevens was enough to make the Aussie dollar slightly stronger against most currencies.
     
  3. John From Moneycorp

    John From Moneycorp Foreign Exchange Expert

    The latest Aussie dollar review is below - thanks

    The Aussie dollar was the top performer among the ten most-actively-traded currencies. It strengthened by nearly four cents against the pound and by five against the euro.

    The Australian economic statistics were adequate rather than spectacular. House prices were up by 5.1% in the year to June and unemployment was steady at 5.7%. Paradoxically it was an interest rate cut by the Reserve Bank of Australia that sent the currency higher. The Cash Rate reduction from 2.75% to 2.5% had been widely expected and the RBA indicated it had no plans for any further cuts.

    Sterling was unable to keep up with the rebounding Aussie but the UK news and numbers were positive for the pound. The services sector reported the quickest expansion since 2006 and manufacturing and industrial output both delivered healthy increases. The Bank of England's long-awaited "forward guidance" revealed that the Bank Rate would only stay low as long as inflation remained in check.
     
  4. John From Moneycorp

    John From Moneycorp Foreign Exchange Expert

    The main news coming up on Tuesday is the release of the RBA Monetary Policy Meeting Minutes.

    The minutes may provide an indication on strategy over further potential interest rate cuts in Australia.
     
  5. John From Moneycorp

    John From Moneycorp Foreign Exchange Expert

    In line with expectations, the Reserve Bank of Australia (RBA) has left interest rates unchanged at 2.5%. In their announcement, the RBA didn’t provide any indication over potential further rate cuts.
     
  6. John From Moneycorp

    John From Moneycorp Foreign Exchange Expert

    Good news for the UK this morning – construction activity grew at the fastest pace in nearly six years in August, in another sign that the economic recovery in the UK is gathering pace.

    There has also been some positive news for Australia which has boosted the Aussie dollar. Australia reported better-than-forecast growth numbers for the April to June quarter. Gross domestic product (GDP) expanded 2.6% during the quarter, from a year earlier.

    The Aussie dollar has also been stronger against the pound following the RBA statement earlier this week which did not signal any further interest rate cuts in the short term.
     
  7. John From Moneycorp

    John From Moneycorp Foreign Exchange Expert

    Interesting comments from Chancellor George Osborne yesterday – he said in a speech that the UK economy is “turning a corner”.

    He appeared to be directing his speech at his opponents, particularly the Labour party, who have been critical of the coalition government’s austerity measures.

    Time will tell if he has jumped the gun with his bullish comments – there has certainly been some positive signs recently in the UK, however there is still a long road ahead.
     
  8. John From Moneycorp

    John From Moneycorp Foreign Exchange Expert

    The pound is stronger against the Australian dollar today.

    There is anticipation, in Australia, that there could be another interest rate cut in the near term.

    The pound has also reacted well from comments from Bank of England Governor Mark Carney – his personal view is that he doesn’t see a case for quantitative easing stating the UK economy is strengthening.
     
  9. John From Moneycorp

    John From Moneycorp Foreign Exchange Expert

    The Australian dollar had a good week against the pound.

    Why?

    The Aussie was one of the top performers last week, strengthening by a cent and a quarter against the pound. It received help from news of stronger-than-expected Australian retail sales and purchasing managers' index (PMI) readings.

    Another boost came from the Reserve Bank of Australia, which kept its Cash Rate steady at 2.5% and implied in its statement that it was not planning another rate cut.
     
  10. John From Moneycorp

    John From Moneycorp Foreign Exchange Expert

    The latest Australian dollar update is below, thanks.

    The Australian and New Zealand dollars both had a good week. For the Aussie it meant a cent-and-a-quarter gain against the British pound, two thirds of a cent won from the euro and a half-cent climb against the US dollar.

    As the week progressed investors became steadily more confident that the warring politicians in Washington would not drive the United states over the brink of default by refusing to approve an increase to the "debt ceiling", the aggregate limit on the amount the government can borrow. With that in mind they shunned the safe-haven Japanese yen and reinvested in the allegedly more "risky" commodity-oriented currencies including the Australian and New Zealand dollars. The Australian economic data helped that cause; more than 9k more people found work in September and the unemployment rate fell from 5.8% to 5.6%.
     
  11. John From Moneycorp

    John From Moneycorp Foreign Exchange Expert

    The Aussie dollar had a difficult week. It lost two thirds of a cent to the US dollar, a cent and a quarter to the pound and two and a quarter cents to the euro.

    Why?

    Two important influences affected the Australian dollar, both of them occurring on Wednesday morning.

    The first, and a positive for the Aussie, was a higher-than-expected 2.2% inflation rate. Investors saw it as delaying any move by the Reserve Bank of Australia to reduce AUD interest rates.

    The second event, just a couple of hours later, was a negative. There was a sharp sell-off for all the commodity-related currencies in response to a squeeze in the Chinese money market that pushed up short-term rates. Investors feared that the Chinese authorities were deliberately trying to dampen the economy and, with it, Chinese demand for the exports of Australia, New Zealand and Canada.
     
  12. John From Moneycorp

    John From Moneycorp Foreign Exchange Expert

    The Australian dollar continues to weaken against the pound.
    Why is the Australian dollar on a downward spiral at the moment?
    Comments from Reserve Bank Governor Glenn Stevens saying Australian dollar remains "uncomfortably high".
    News from the US - meeting minutes revealed US Federal Reserve policymakers expect to begin tapering economic stimulus ‘in coming months’.
    China - disappointing manufacturing data released. China is Australia’s largest trade partner so any news like this can impact the Aussie dollar.
     
    Ktee likes this.
  13. Ktee

    Ktee Administrator

    Seems a great time to exchange money right now
     
  14. John From Moneycorp

    John From Moneycorp Foreign Exchange Expert

    Australia's cricket team had a far better week than its currency. The Aussie dollar was by far the worst performer, losing three cents to the euro, five cents to the US dollar and six to sterling.
    With no useful Australian economic data to guide them, investors had to rely on the central bankers to give them direction. They got plenty, from the minutes of policy meetings at the Reserve Bank of Australia and the US Federal Reserve and from the mouth of RBA Governor Glen Stevens. The Federal Reserve offered a reminder that its money-printing stimulus programme would begin to wind down "in coming months", thus turning off the money tap that has been so helpful to the Aussie. Governor Stevens said he had "an open mind" about using intervention to weaken his currency, suggesting that the RBA might actually go ahead with it.
     
  15. John From Moneycorp

    John From Moneycorp Foreign Exchange Expert

    The latest Australian dollar review is below – thanks

    Life was not as difficult for the Australian dollar as it had been the previous week but it was no success story. The Aussie lost half a cent to sterling. Half a cent to the US dollar and two cents to the euro.

    Some of the Australian economic data were decent enough. Retail sales were up by a monthly 0.5% in November. Activity in the construction sector grew more quickly and in the services sector it shrank more slowly. Companies' pre-tax profits averaged 3.9% in the third quarter, up from 0.4% in the previous three months.

    But the figures for third quarter gross domestic product were disappointing. Quarterly growth slowed to 0.6% when it should have accelerated to 0.8%. As usual, the Reserve Bank of Australia was the Aussie's biggest handicap. The RBA said in its monthly statement that "the Australian dollar... is still uncomfortably high".
     
  16. John From Moneycorp

    John From Moneycorp Foreign Exchange Expert

    The Australian dollar has been boosted by stronger growth data in the fourth quarter of last year.
    A government report showed gross domestic product climbed 0.8 per cent in the fourth quarter from the third and 2.8 per cent from the same quarter a year earlier.
     
  17. John From Moneycorp

    John From Moneycorp Foreign Exchange Expert

    Hi all - weekly GBP/AUD review below, thanks
    It was a much better week for the Australian dollar.
    Although it was not quite top dog it was up there with the leaders, strengthening by a cent and a half against the US dollar and by two against sterling.
    It was the improved Australian ecostats that did the trick: the figures for new home sales, manufacturing, building permits, retail sales, the trade surplus and economic growth were all better than expected.
     
  18. John From Moneycorp

    John From Moneycorp Foreign Exchange Expert

    The Australian dollar has been much stronger against the pound. It was boosted by comments from Australia Governor Glenn Stevens.

    Stevens talked about a prospective housing boom and a shift in economic emphasis away from mining and towards other industries - the Aussie strengthened by a cent against sterling.

    In addition, it was boosted by news from China, speculating they may accelerate stimulus measures to boost its economy. China is a key trading nation for Australia therefore any news from there can impact the exchange rate.
     
  19. John From Moneycorp

    John From Moneycorp Foreign Exchange Expert

    There has not been much currency related news of note over the weekend/today.
    Worth keeping an eye on the monthly Reserve Bank of Australia (RBA) Rate Statement on Tuesday morning – in this statement, the RBA announces its policy on interest rates.
     
  20. John From Moneycorp

    John From Moneycorp Foreign Exchange Expert

    The latest currency update is below, thanks.

    The Aussie did not begin the week well, losing three cents to sterling in two days, but it staged a modest recovery after that, leaving it a cent lower against the US dollar and the euro and more than two cents weaker against sterling. As is often the case, the Australian dollar's biggest handicap was its central bank. In this instance the damage was done by Guy Debelle, an assistant governor of the Reserve Bank of Australia, and by the minutes of the recent RBA policy meeting.

    The minutes confirmed that Australian interest rates will remain at a record low "for some time yet" and Mr Debelle said in a speech that a decline in capital inflows would be likely to weaken the Australian dollar. It did not help that his comments came hard on the heels of a warning from Standard and Poor's that Australia could lose its AAA credit rating if government spending cuts are not put into effect.
     

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