USD/AUD Exchange rate

[arnyswart]

Hi all

Several people had thoughts on what is happening with our currency and I wanted to find out what others opinions are.

Rather than derail the model X thread I set this one up. What's your best guesses as to where we are going currency wise and why?

 

[timpoo]

Hi all

Several people had thoughts on what is happening with our currency and I wanted to find out what others opinions are.

Rather than derail the model X thread I set this one up. What's your best guesses as to where we are going currency wise and why?

This is a complicated question!

My view is that the Aussie dollar will go down to 65 in the next year or so for a few reasons:

1. economic volatility will drive investors to safer currencies like the USD
2. mining boom continued slowdown, with countries less receptive to our coal and iron ore, means downward economic growth
3. interest rates will be further lowered to try and prop up business investment and housing investment, further driving down the dollar
4. lowered AUD drives local stock market growth, which many people want

All of this does three things:

1. Helps our exporters, which traditionally has been a very good thing, though I question for our fossil fuels sector, whether that's a good thing

2. Encourages foreign investment, which is a good and bad thing: it makes it more attractive to invest in Australian projects like utility scale renewable energy projects; but at the same time fuels property prices growth for foreign investors

3. Makes it harder, much harder in fact, to import things, like the Model X

That's just my take. I would say that if you're looking to buy a car, do it now, and be happy. Tesla have, what I presume, to be 3-6 month global currency hedges, so their movements aren't with the spot rate, but when it does move, it can move a lot.

I'm not a financial expert please don't use my advice for investment or purchase purposes, that would be highly ridiculously bad.

 

[Brissienew]

This is a complicated question!

My view is that the Aussie dollar will go down to 65 in the next year or so for a few reasons:

1. economic volatility will drive investors to safer currencies like the USD
2. mining boom continued slowdown, with countries less receptive to our coal and iron ore, means downward economic growth
3. interest rates will be further lowered to try and prop up business investment and housing investment, further driving down the dollar
4. lowered AUD drives local stock market growth, which many people want

All of this does three things:

1. Helps our exporters, which traditionally has been a very good thing, though I question for our fossil fuels sector, whether that's a good thing

2. Encourages foreign investment, which is a good and bad thing: it makes it more attractive to invest in Australian projects like utility scale renewable energy projects; but at the same time fuels property prices growth for foreign investors

3. Makes it harder, much harder in fact, to import things, like the Model X

That's just my take. I would say that if you're looking to buy a car, do it now, and be happy. Tesla have, what I presume, to be 3-6 month global currency hedges, so their movements aren't with the spot rate, but when it does move, it can move a lot.

I'm not a financial expert please don't use my advice for investment or purchase purposes, that would be highly ridiculously bad.

Good post timpoo.

 

[Aussie Yank]

Timpoo's posting is well thought out and likely close to the circumstances

A few things:
...realize that there were two things holding UP the Aussie: Dramatic growth in China, and the US printing new money. The US drove their currency down which accounting for most of the Aussie rise. And then there was a once in a lifetime, "super growth" in mineral consumption by China. Both events are now over. Carry Trade currencies (aka the Aussie, Canadian, etc) have run their course.

Instead of planning for the future, Australia used the money to temporarily increase in the "quality of life" for its citizens and thus win elections (tax cuts, baby bonus, etc), and now it is gone.

There is little keeping the Australia currency attractive. There are few real exports (except for things dug out of the ground), the stock market has never recovered from the crash in 2007/2008 (except for counting dividends, which are lower if you are a foreign investor because franking credits do not count). There are no new and exciting companies (aka Testa, Apple, Google). Remember Apple has more cash that the Australian government.

The historical ration of AUD/USD is 0.70. We are even now above that. The australian economy is not dynamic, we should expect it below the historic rate, but perhaps not as bad a 0.49 in 2001/2002.

My bet is 65 cents toward year end this year and lower in 2016.

Hedge your bet, commit to the purchase now (price becomes fixed in local currency). And think about paying for your US vacation sooner, rather than later

SAME DISCLAIMER as Timpoo

p.s. one more thing, the Aussie Stock Market is headed lower