Australian Dollar Set To Plunge

[peter991]

Reference: news.com.au

Link: Dollar Set To Plunge

By Nicki Bourlioufas

May 12, 2005

The good time could be over with the local dollar set to plunge below US70 cents as commodity prices come off highs and foreign investment into Australia slows, according to Westpac Bank.

Westpac has forecast the local dollar will fall to US72 cents by December 2005 and to US64 cents by December 2006.

"The Australian dollar looks set for a fall in the second half of this year," said Westpac in a research report released today.

"The fundamentals do not improve in 2006 either. In fact, the unfavourable trend accelerates."

"We will see a combination of factors which have been positive over the last few years become negative," said Westpac senior economist Andrew Hanlan.

Westpac says a narrowing gap between US and Australian interest rates will slow foreign investment into the country as the return on investments in Australia becomes relatively less attractive. That will drive down demand for the local unit.

While Australian interest rates are forecast to stay on hold at 5.50 per cent, US rates are set to climb to 4 per cent by the year's end and to 4.5 per cent by the end of 2006.

"With the US Federal Reserve moving short rates (up) faster than the long end sells off, there will be another consistent weight on the currency through most of the period under discussion," said Westpac. The pace of global growth is also set to slow, "which is a sign that commodity prices will start to peak out," said Mr Hanlan.

Already commodity prices have eased, which has hurt resource and oil stocks like BHP Billiton, Woodside Petroleum and Rio Tinto.

Westpac expects the huge US current acocunt deficit will stablilise, which will push back up demand for the US dollar, to the detriment of the local dollar.

Westpac forecasts Australian interest rates will stay on hold through 2005.

"We have argued consistently that the March rate hike was going to be the last in the cycle. We have argued that there is evidence that the economy was already slowing and that the household sector would be particularly sensitive to the move.

The Reserve Bank's official communication is now dovetailing with that view," said Westpac.

Any thoughts on what the fall in the value of the Australian Dollar will do to the exchange rate of AUD to THB ?

[thaiaan]

Reference: news.com.au

Link: Dollar Set To Plunge

By Nicki Bourlioufas

May 12, 2005

The good time could be over with the local dollar set to plunge below US70 cents as commodity prices come off highs and foreign investment into Australia slows, according to Westpac Bank.

Westpac has forecast the local dollar will fall to US72 cents by December 2005 and to US64 cents by December 2006.

"The Australian dollar looks set for a fall in the second half of this year," said Westpac in a research report released today.

"The fundamentals do not improve in 2006 either. In fact, the unfavourable trend accelerates."

"We will see a combination of factors which have been positive over the last few years become negative," said Westpac senior economist Andrew Hanlan.

Westpac says a narrowing gap between US and Australian interest rates will slow foreign investment into the country as the return on investments in Australia becomes relatively less attractive. That will drive down demand for the local unit.

While Australian interest rates are forecast to stay on hold at 5.50 per cent, US rates are set to climb to 4 per cent by the year's end and to 4.5 per cent by the end of 2006.

"With the US Federal Reserve moving short rates (up) faster than the long end sells off, there will be another consistent weight on the currency through most of the period under discussion," said Westpac. The pace of global growth is also set to slow, "which is a sign that commodity prices will start to peak out," said Mr Hanlan.

Already commodity prices have eased, which has hurt resource and oil stocks like BHP Billiton, Woodside Petroleum and Rio Tinto.

Westpac expects the huge US current acocunt deficit will stablilise, which will push back up demand for the US dollar, to the detriment of the local dollar.

Westpac forecasts Australian interest rates will stay on hold through 2005.

"We have argued consistently that the March rate hike was going to be the last in the cycle. We have argued that there is evidence that the economy was already slowing and that the household sector would be particularly sensitive to the move.

The Reserve Bank's official communication is now dovetailing with that view," said Westpac.

Any thoughts on what the fall in the value of the Australian Dollar will do to the exchange rate of AUD to THB ?

<{POST_SNAPBACK}>

umm...less bahts?

[Khutan]

As the AUD would not be seen as having a huge influence on the THB, you can assume the two currencies move around independantly, therefore if the AUD loses value vs the USD, you would not expect to see much of a change in the THB vs USD.

With this in mind, assuming as the article says (didn't they predict parity with the USD by November 2003?) that the AUD will lose 8c or 800 basis points then the AUD will certainly buy less THB

so if the AUD today is .74c US then 74c buys 29.8 THB Add a bit of demand for the AUD for settlements etc and you get the 31THB for each AUD.

So if the AUD only buys .64c US, then that represents 25.6 THB per AUD. Add 1.25 Baht for demant on Import/Export settlement and you have 1 AUD = 26.85THB.

Therefore You wil get about 4 baht less per dollar in that scenario.

This of course assumes the THB vs USD will remain the same. If the THB loses ground against the USD then relatively, the change will be neglegable

At the end of the day, if you are here on a holiday, you may miss out on a beer or two, if you are negotiating a Coal or steel contract worth millions of dollars, its a bit deferent, but those are all done in USD anyway.

Hope that helps.

[peter991]

Thanks mattnich for explaining the situation in clear, simple language that people like me (non-financial-techno-wizards) can understand.

I have been following the AUD to THB for the past 4 years and during that time the exchange rate of AUD to USD has varied around 10c, but the AUD to THB has actually improved by 2.5THB.

[BaanOz]

Thanks mattnich for explaining the situation in clear, simple language that people like me (non-financial-techno-wizards) can understand.

I have been following the AUD to THB for the past 4 years and during that time the exchange rate of AUD to USD has varied around 10c, but the AUD to THB has actually improved by 2.5THB.

<{POST_SNAPBACK}>

AUD to THB chart here

Cheers BaanOz

[simcity]

I will not to worry to much with this article , I think it is deceiving : woodside / bhp / rio did increase the shares of over 30 % in a few weeks , now they are giving back some of this gain !