AUD/USD Exchange

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Yep.... I have an SGD loan with one of the Aussie "big 4" banks there, current rate 1.90%.

As Eagle said, they only lend to those residing outside of Aus; with Aus property as security and income in (usually) USD.

I believe the main reason they don't do foreign loans to Aussies based in Aussie (earning AUD) is all related to currency risk. I don't think it's a regulatory thing (though I may be wrong on this detail).

The currency risk is real and needs to be understood.... it was not looking good when AUD went down to < SGD 0.95 on late '08.... but now @ >1.25 it's a double win on currency and the rate. :D
 
I guess from the lenders, there is that currency risk too - which they wouldnt be keen on.

Im sure there is also regulations involved too though, as was mentioned.

Interesting ideas, and Im sure a few aussies living in the US and that are getting a very good deal currently which could set them up for a long time.

Thanks for the replies.
 

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Eagle87 said:
98.96...

DeanoT getting hard ... :p
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LOL.

Sportsbet were offering odds of 2.50 that the AUD would NOT reach parity before 31/12/1010 a few days ago. I checked again earlier today, and it was down to 1.83. Just checked again now, and they are no longer offering bets on the AUD!

When the RBA doesn't rase interest rates as expected, and yet the AUD climbs a cent or two anyway, you know the underlying strength of the market is strong.
 

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With the exchange rate at 98.4c, I thought I'd have a look at a Travelex shop.

They were offering 91.7c! I wonder if they get any business at all.
 
red+black said:
With the exchange rate at 98.4c, I thought I'd have a look at a Travelex shop.

They were offering 91.7c! I wonder if they get any business at all.
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Many people, including regular travellers, have no idea about foreign exchange whatsoever. I'd happily bet they get plenty of business from people who haven't looked at AUD/USD prices in a while, and think they are getting a good deal at 91.7c.

r dub 19 said:
Printing money? Doesn't the RBA just sell the aussie dollar to reduce it's value?
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The best way for the RBA to reduce the value of the AUD is to reduce interest rates (or not increase them further). If the RBA is worried about inflation, and it does appear to have some concern, then they will find it very difficult to manipulate the AUD and keep inflation down at the same time.
 
DeanoT said:
The best way for the RBA to reduce the value of the AUD is to reduce interest rates (or not increase them further). If the RBA is worried about inflation, and it does appear to have some concern, then they will find it very difficult to manipulate the AUD and keep inflation down at the same time.
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Is the value of the $A of any concern to the RBA? I don't see why it should be, since a high $A is going to slow the economy, which is what raising rates is meant to do anyway.
 
DeanoT said:
The best way for the RBA to reduce the value of the AUD is to reduce interest rates (or not increase them further). If the RBA is worried about inflation, and it does appear to have some concern, then they will find it very difficult to manipulate the AUD and keep inflation down at the same time.
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Yeah but reducing interest rates isn't really an option given inflation worries. Hasn't there solution to raise or lower the AUD been to trade it?

Fire said:
Is the value of the $A of any concern to the RBA? I don't see why it should be, since a high $A is going to slow the economy, which is what raising rates is meant to do anyway.
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Some of our exporters lose out, i.e farmers.
 
Fire said:
Is the value of the $A of any concern to the RBA?
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According to the RBA, their purpose is:

  1. the stability of the currency of Australia;
  2. the maintenance of full employment in Australia; and
  3. the economic prosperity and welfare of the people of Australia.’
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I have no idea what the RBA means by "stability of the currency" or how one should measure such stability. At what point is the AUD too high or too low, and relative to which other currency, to satisfy the definition of stability. Or do they mean volatility, rather than the actual price of the AUD itself?

Stuffed if I know.

Also note that there is no explicit mention of inflation anywhere in the above, even if it might be implicit in the stability of the currency line.

Fire said:
I don't see why it should be, since a high $A is going to slow the economy, which is what raising rates is meant to do anyway.
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Exactly. If a high AUD means bad news for Australian industry and exporters, then this should have the same effect as the RBA raising rates to cause a slow down.

We floated the AUD for a reason - it works. Plus central bank interventions never work for long. There is an old trading saying which is "fade the central bank". If the RBA steps in to keep the AUD low, then go the other way. Will be interesting to see if they do indeed intervene.
 
DeanoT said:
I have no idea what the RBA means by "stability of the currency" or how one should measure such stability. At what point is the AUD too high or too low, and relative to which other currency, to satisfy the definition of stability. Or do they mean volatility, rather than the actual price of the AUD itself?.
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Higher volatility => higher currency risk => lower foreign investment

Also note that there is no explicit mention of inflation anywhere in the above, even if it might be implicit in the stability of the currency line.
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Inflation is covered by points 2. and 3.
High inflation hurts growth lowering employment and destroys wealth.
 
One of the things to bear in mind here is that this isn't so much Aussie strength as USD weakness.

I have just got back from a month in Asia and many countries are having the same discussion about the "strength" of their currency and the possible negative impacts on trade...

Of course if "everyone" has a strong currency except the US (&UK), then perhaps the better way to look at this is that its USD weakness rather than AUD strength....
 
Gotta love the prognostiocators:

http://online.wsj.com/article/BT-CO-20101005-700621.html

Jonathan Cavenagh, strategist at Westpac, said the high-yield currency could well suffer in coming days after the RBA's move, with next major support at US$0.9460.

"If we bounce off there, then we can stay range bound but if we push through there, that signals a greater correction," Cavenagh said.
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Translation: "It might not go below 94, but if it does it might go lower than that or it might not."
 
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