AUD/USD Exchange

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A Living God said:
Higher volatility => higher currency risk => lower foreign investment

Inflation is covered by points 2. and 3.
High inflation hurts growth lowering employment and destroys wealth.
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Aware of the above, my point was about the ambiguity of the RBA's stated goals. There is never any specificity about their goals, and that is clearly intentional. Gives them lots of wiggle room to change their opinion.

Eagle87 said:
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....
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Above is all true, especially the bold.

Which goes to my earlier point about what benchmark to use when measuring "stability". Stability against what? The USD? GBP? Euro? TWI?

If one narrowly uses the US as a benchmark to indicate AUD strength, then that may be misleading. A strong AUD/USD may only hurt exports to the US (and those who peg their currency to the USD).

If the AUD is not comparatively strong against other currencies, exports may not be affected all that greatly, especially where commodity and forex prices have been locked in well before the recent AUD/USD move.
 
Quick question regarding the AUD/USD exchange.

My wife and I are looking to move back to Thailand in 6 months and i'm wondering if it would be a good idea to change some of our AUD to USD now?

This is momey which is being saved to start a business so I don't want to do anything risky. Would it be better to just put it into a term deposit? It's not a huge deal of cash.

Thanks.
 
carmi99 said:
Quick question regarding the AUD/USD exchange.

My wife and I are looking to move back to Thailand in 6 months and i'm wondering if it would be a good idea to change some of our AUD to USD now?

This is momey which is being saved to start a business so I don't want to do anything risky. Would it be better to just put it into a term deposit? It's not a huge deal of cash.

Thanks.
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Why you changing to USD instead of just transferring directly to thai baht?

By swapping to USD then swapping to thai baht you just get clipped (by the banks) twice ...

The AUD is currently strong against the baht... but the thai government has flagged measures to try and shrink the baht v USD ... that could make the Aussie stronger v the baht ....

The reality is that its pretty good right now but who knows .... my bet is we could be stronger v the baht because of the apparent intention of thais to hold or reduce the value of their currency ... but that is a guess..
 

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Depends who you are. First the easy stuff.

Exporters and Local Tourism dont like it. Exporters will now sell less overseas, as their price is now more expensive for international buyers than what it would be with a lower exchange rate. Tourism gets hurt in Australia as it is now a dearer place to visit than before.

For example, $1 US could buy a 2 bags of Australian lollies($1AU a bag) back in 2002(when it was $1US=50cAUS), but now they can only buy one bag of lollies with the US dollar now.

But on the other side of the coin the high dollar is good for importers and Australian tourists. Importers can now buy more stuff from overseas cheaper than before as we can buy more currency from overseas with less local dollars. For example, $1AU could buy half a bag of US lollies back in 2002. Nowadays we can buy a full bag of US Lollies with that same AUS dollar.

Is it good? Tough to say. We are happier that we(the consumers) can now purchase goods cheaper overseas, saving us money. But on the other side of the coin, our local economy will suffer. The more Australia Imports, the less people spend on local goods. Combine that with the exporters getting less business as well and it will hurt our growth in the future. See Japan. It is bad news when their currency appreciates(goes up).

But the wonders of the monetary system is that it will adapt. For example, If the economy suffers because of this and inflation goes down, the RBA will then drop interest rates to try and simulate the economy. One effect this has on the economy is that the exchange rate will fall, which will reverse this import/export balance.

It should be noted that interest rates doesnt only effect the exchange rate to simulate the economy. There are also other factors(currency demand/supply) which effect the exchange rate. What im basically trying to say that as long as it hasnt done this too quickly then it should be alright.
 
BobbyMorri said:
Depends who you are. First the easy stuff.

Exporters and Local Tourism dont like it. Exporters will now sell less overseas, as their price is now more expensive for international buyers than what it would be with a lower exchange rate. Tourism gets hurt in Australia as it is now a dearer place to visit than before.

For example, $1 US could buy a 2 bags of Australian lollies($1AU a bag) back in 2002(when it was $1US=50cAUS), but now they can only buy one bag of lollies with the US dollar now.

But on the other side of the coin the high dollar is good for importers and Australian tourists. Importers can now buy more stuff from overseas cheaper than before as we can buy more currency from overseas with less local dollars. For example, $1AU could buy half a bag of US lollies back in 2002. Nowadays we can buy a full bag of US Lollies with that same AUS dollar.

Is it good? Tough to say. We are happier that we(the consumers) can now purchase goods cheaper overseas, saving us money. But on the other side of the coin, our local economy will suffer. The more Australia Imports, the less people spend on local goods. Combine that with the exporters getting less business as well and it will hurt our growth in the future. See Japan. It is bad news when their currency appreciates(goes up).

But the wonders of the monetary system is that it will adapt. For example, If the economy suffers because of this and inflation goes down, the RBA will then drop interest rates to try and simulate the economy. One effect this has on the economy is that the exchange rate will fall, which will reverse this import/export balance.

It should be noted that interest rates doesnt only effect the exchange rate to simulate the economy. There are also other factors(currency demand/supply) which effect the exchange rate. What im basically trying to say that as long as it hasnt done this too quickly then it should be alright.
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The bolded bit assumes that this is some sort of uniform strengthening of the AUD against all our trading partners....

The reality seems to be more of a uniform weakening in currencies of US, UK & a few others...

I wouldn't have thought that exporters to Asia were particularly affected by the current position unless the deals were in USD with no cross currency adjustments ...

Certainly anyone exporting to the US, UK and some others will be affected if the price had been agreed a while ago in the foreign currency and they didn't hedge. But in reality, the bigger impact will be an inflationary one in the US & UK as the cost of their imports goes up - which also makes local suppliers (in those countries) more attractive which is surely part of the reason this is happening ...
 
skzm said:
Or expats...
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Actually, its tremendous for those of us who are expats and get paid from Aussie (or based on AUD's). :)

That said, those of us doing that in Asia haven't seen the same recent movements as we would have if we were in the US or UK.

But, I do take your point, if I had moved to the UK earning pounds say 2 years back I'd be feeling some stress now paying my AUD mortgage...
 
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