Rates Cuts And A Short George = The End In Sight ?

[David48]

The Reserve Bank of Australia's decision today to cut the official cash rate to 2.75% takes it to a record low since reporting began in the 1990s.

Not a remarkable fact in itself as many Western countries rates are lower however ...

The Australian dollar fell in overnight trade on the back of rumours that billionaire US investor George Soros is betting the local currency will fall. A large number trades shorting the dollar totalling $US1 billion were placed via Hong Kong and Singapore late Monday, believed to be by Soros Fund Management.

Here

What is interesting is the the majority of the economists thought that a rate cut was unlikely at this meeting of the Reserve Bank of Australia. If George Soros bet the market ... it appears that again, he won his bet.

Over the past years, the Aussie Battler has been a market darling and compared to the amount of currency in circulation, trading at significant volumes ... but that might be about to end.

If you own Australian dollar assets, it maybe worth considering liquidating some of them while the Aussie Dollar remains high ... I did today.

Could the Aussie go the way of the Pound or the US Dollar ... a slow downward spiral?

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[topt]

This was sent last night in a XE.com mail -

"Weak data from Australia and China pressured the Aussie dollar, discouraging news that came on the eve of a RBA rate decision. Local retail sales unexpectedly fell 0.4% (m/m) in March, which went against expectations of a 0.2% (m/m) increase. Meanwhile, service firms in China grew in April, but at the slowest pace since August 2011, worrisome news since the Asian giant is the top consumer of Australia’s resource exports. A slim majority expect the RBA on Tuesday will keep its key lending rate at a record-equaling low of 3.0%"

note "slim majority" - the large minority were correct this time

A lot will depend on future news out of China which could go in any direction.

[Support]

Try to keep it related to the Thai baht and how it affects those here, thanks

[lannarebirth]

Try to keep it related to the Thai baht and how it affects those here, thanks

They are discussing it in relation to the Thai Baht. When the article says the $AUS fell, it means it fell in relation to other currencies. The fact that they're posting it on a Thai oriented website implies it is a ฿THB related topic. You might do better to just move the topic to the Business and Finance forum.

[NeverSure]

David, this is a two edged sword. Part of it is pure Australia. There is no doubt there are problems there similar to other Western countries.

Part of it is China. No one seems able to admit that China is hurting. Or, maybe they just don't want to see it. I have been hammering about the problems in China, and warning of its problems spreading throughout Asia.

Every time I bring up China problems, I get arguments about how much their (falsely reported) debt to GDP ratio is, etc. etc.

For the mods, I'm on topic about Thailand, and currencies relative to the baht.

China's problems will spread not only through Asia including Australia, but to some degree to the major Western economies. Some of those economies like Australia who depend on China for purchases (exports) will get hurt. Some who China depends on for its exports won't be hurt.

China is the elephant in the living room.

The drop in the Australian dollar is a direct reflection of business in China.

The only other currency (other than the Australian dollar and Chinese currency) that I know of that is inflated beyond its fundamentals is the Thai baht. All the rest of the main players have been deliberately pushing the value of their currencies down to keep their exports flowing. China has too, but not Thailand or Australia.

I never actually try to tell anyone what to do because I'm not a seer. I don't know for sure what is going to happen. But I will say I have very little money in Thai baht, and none in the Australian dollar.

I don't think that buying a lot of Thai baht right now fits the definition of buying low and selling high.

$.02

[samran]

David, this is a two edged sword. Part of it is pure Australia. There is no doubt there are problems there similar to other Western countries.

Part of it is China. No one seems able to admit that China is hurting. Or, maybe they just don't want to see it. I have been hammering about the problems in China, and warning of its problems spreading throughout Asia.

Every time I bring up China problems, I get arguments about how much their (falsely reported) debt to GDP ratio is, etc. etc.

For the mods, I'm on topic about Thailand, and currencies relative to the baht.

China's problems will spread not only through Asia including Australia, but to some degree to the major Western economies. Some of those economies like Australia who depend on China for purchases (exports) will get hurt. Some who China depends on for its exports won't be hurt.

China is the elephant in the living room.

The drop in the Australian dollar is a direct reflection of business in China.

The only other currency (other than the Australian dollar and Chinese currency) that I know of that is inflated beyond its fundamentals is the Thai baht. All the rest of the main players have been deliberately pushing the value of their currencies down to keep their exports flowing. China has too, but not Thailand or Australia.

I never actually try to tell anyone what to do because I'm not a seer. I don't know for sure what is going to happen. But I will say I have very little money in Thai baht, and none in the Australian dollar.

I don't think that buying a lot of Thai baht right now fits the definition of buying low and selling high.

$.02

Australia doesn't need to. It still racks up trade surpluses http://www.abc.net.au/news/2013-05-07/australia-swings-back-to-modest-trade-surplus/4674458

if the AUD tanks, then all that will mean is Australian minerals will be relatively cheaper....so AUD in the pockets even if people buy less.

[David48]

Thanks to Support for letting this remain open for comment.

As promised, a relationship from the OP to those members in Thailand.

We have all read (many times) those members here in Thailand who rely on an overseas pension to maintain their daily living expenses and regularly bemoan the falling purchasing power of their US Dollar/GBP etc.

But a lot of that decline was due to the Dollar/Pound/Euro falling and some relative strength against the Baht.

Till recently, with the Aussie Dollar within a 10% range of it's all time high against the Thai baht has maintained our purchasing power.

I'm no chartist (and I would like the market traders to offer an opinion re the above chart), but it appears that, for this cycle, the Aussie has topped out and is in a current down thread vs the Thai Baht.

We are seeing lower highs and lower lows vs the Thai Baht.

For those technically minded a research paper by the Reserve Bank

OH, an interesting fact "According to the BIS, the average daily turnover between the Australian dollar and US dollar is over $US250 billion, 6 per cent of global turnover (the Australian economy is only about 1 per cent of the world economy)." and an interesting read here

After the most recent interest rate cut, I have transferred some cash assets and converted them from the Aussie Dollar into the Thai Baht.

But I'm not saying this strategy is right for you ... but it's worthy of consideration?

[David48]

From today's analysis of the RBA's statement ... Economists Predict 2% RBA Cash Rate

CBA forecasts that the RBA’s further “scope” implies one more cut this year, which the economists believe will come in August, to 2.5%.

Like CBA, ANZ is forecasting one more cut this year, in either August or September.
But given a weak outlook for non-mining investment in the second half of 2014 and into 2015, the economists believe there remains a risk rates could be lower than their 2.5% forecast over the next 12-18 months.

Macquarie believes the next rate cut will come as early as next month.
The central bank rarely delivers just the one cut in isolation, Macquarie points out, thus June is a very strong candidate given the raft of March quarter data which the RBA will then have at hand, ahead of the GDP release.

Here

What does this mean for us in Thailand?

Maybe our good exchange rate, AUS vs THB may lower ... time for some forward planning.

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[Pib]

Just thinking about whether your home country currency will appreciate or depreciate against the baht makes a person feel like George Soros looks in the Post #1 picture.

[David48]

Some further discussion here

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[David48]

Talking point: The Australian dollar

So is there a currency war going on or not? Well of course there is. The protagonists deny it of course - "Us, currency wars, certainly not.

We're just cutting interest rates and printing money to help our economies." It's a polite war, but a deadly one and Australia is in it unarmed, its domestic industries pillaged at will.

But the other thing we learnt this week, on Friday in fact, is that the dollar will come down probably when we least expect it.

The vultures are circling.

George Soros is said to have shorted it, and another billionaire, Stanley Druckenmiller, says he's shorting it too. It's going to come down hard, he says.

Now billionaires aren't always right, but they're usually more right than me.

I'll go with them.

Full (short) ALAN KOHLER Video here

[David48]

Against the USD, the Aussie has crashed.

Against the Thai Baht, the Aussie continues to fall.

Seriously consider switching some assets out of the Aussie and if you have capacity.

Just saying like ...

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