Remember the LORD for it is he who gives you the ability to produce wealth and so confirms his covenant... Deut. 8:18

Sunday, September 11, 2011

AUD under pressure

Mon 12th Sept... Aussie fell to weeks low of 3.14 agst. Ringgit on fresh worries on euro zone debt crisis that prompted a sell-down in riskier assets and buying of Treasuries..
Strangely, Australian shares slid more than 3 % though the commodities-based economy is more aligned towards China rather than the US or Euro market.. Is the market factoring a slow down in the growth of the Chinese economy as China tightens credit to rein inflation..?

3 comments:

CP said...

Dear Remnant

I was watching currencies too. At the moment, USD is strenthening. Yes, I do think AUD is affected by China rather than US or EURO. A check on China's banking stocks and policies might give us some clue into the situations. So, I am watching the BANKS, actually.

Factoring in the risk, as such ... a temporary hiding under USD is what to be unfold. Beneath these, we could only see AUD to strengthening(vs USD) in very near future. I do listen to Jim Rogers promoting commodities too. Haha.

Do correct me as I am not-right. Yes, u have been correcting me and those learning-tips still with me!

cheers

TEH

Remnant 888 said...

Yet as much as Australian economy is aligned to China directly yet it is indirectly linked to US and Euro via China's export to US and Euro. So the link is Australia -> China -> US & Euro. Guess global economies are so intricately linked that it beats my brain trying to go figure what's what.
We're like that somebody who can't be right all the time, ha ha..

Yes, at this instance, it does seem like AUD/USD is recovering on time frames of 15 mins and 1 hr, hovering on upper Bollinger's band. H4 and D1 candlesticks does show a rebound from the lower BB so this is a pretty good sign. Let's watch the next 2 days..

Fundamentally, Australian PM Julia Gillard has implied that economy is still strong, banks well capitalised though unemployment (Bluescope has cuts job)numbers isn't so nice yet.

SO Gov't/RBA will probably stay its course of not cutting interest rates and not bowing to the pressure of export-oriented (finished product) manufacturing companies to stay competitive.
The dilemma is Australian commodities companies that export to China are buying finished products from China (cheaper with strong AUD) rather than from their local manufacturers, eg, Bluescope..!

AUD high interest rate do attracts 'carry trade' so many will consider parking their money in AUD. And with the recent Swiss francs losing its appeal as safe haven(intervention of SNB to sell francs as much as to peg to Euro), guess many will perceive AUD and Gold as long term safe assets and they will buy on dips..

Some flying thoughts on commodity:
Jim Roger's fundamental views is really for the long term. I see Commodities as broadly divided into three main sectors - food (grains, milk, juices, meat, etc), fuel (oil, coal, etc) and metals (base industrial, precious).
On the long term, there's only one sub- commodity that will be allowed to rise rapidly as not to cause riots.

Sure food and fuel will also rise but only gradually, cos' Gov't don't want street demo, protest, riots. They can intervene to rein in inflation by raising interest rates so we can cope with rising cost of food and fuel. Or control local pricing on these.
But can Gov't control international price of gold..?

Morever, food (perishable) and fuel(10 years life ?) can't be stored as definitely as gold so they cant be a storage of wealth. Maybe land yielding food, fuel and metals is better asset class (of storage)..

We can talk/ask/do street protest rgd affordable food, affordable fuel, affordable housing... and get the Govt to act/intervene on this and that..
I've never hear/see street riots cos' gold soared in prices, have you..?

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