Gotti enters Australian dollar Twilight Zone

 From old man Gotti at Dad’s Army:

It is now clear that China’s economy is slowing faster than the government would like, and so it has now intervened by lowering interest rates and stabilising the share market.

…This makes the Reserve Bank even more anxious for a fall in the Australian dollar, which is holding stubbornly around US76c to US78c. If Greece leaves the euro, we will see a rush of money into the US, sending the US dollar higher and making it less likely that the US will increase interest rates. In turn, that will send money to Australia chasing our yields and put pressure on the Reserve Bank to lower interest rates so that our currency reflects what is happening in China.

So, a slower than expected Chinese economy, tumbling iron ore and a rising US dollar is going to cause the Australian dollar to jump? I think not!

Some real weird reasoning there but in the end the outcome is right. Any Grexit messy enough to cause a safe haven run to the US dollar will lower our own. It is abundantly clear now that the Aussie falls when risk is really off. That raises the risk that the RBA won’t cut rates owing to our own falling dollar but that outcome is mitigated by the equity market carnage, capex cliff and terms of trade shock.

Rates and the dollar will go lower.