From the WSJ:
Azerbaijan, the Caspian nation best known for its caviar and petroleum, is buying Australian government bonds, joining a growing list of sovereign investors acquiring debt Down Under in a trend that has seen the Aussie dollar labeled a potential safe-haven currency by the International Monetary Fund.
The former Soviet republic’s US$33 billion dollar sovereign-wealth fund—the State Oil Fund of the Republic of Azerbaijan, or Sofaz—said it quietly started buying Australian bonds in July at a time when market data show the Aussie dollar gained 3.4% in value over the month.
“The main purpose of these investments made within Sofaz’s investment policy is diversification of its currency basket,” the fund said in written responses to questions from The Wall Street Journal. “Additionally, Sofaz is expecting these investments to enhance its return in the light of extremely low-yield environment in U.S. and European financial markets.”
Such is the RBA’s concern about the high exchange rate—partly caused by foreign demand for Australian bonds—that it recently started a policy of allowing its foreign-currency reserves to grow in a passive form of intervention.
So, we’re going to give away our production base because a virtually totalitarian central Asian oil and gas competitor reckons it’s a good idea.
I believe strongly in markets but a little pragmatic pause at this point might be in order.
