The AFR has some deeply erroneous patter about the dollar this morning:
The Australian dollar has crashed against the US dollar and currency strategists say it could fall further as confidence about the future of the US economy grows.
From $US1.055 on April 12, the Aussie has lost 6 per cent of its buying power against the US dollar as it slumped below parity. It sagged further to trade at $US98.3 on Thursday.
The source of the difference is bubbly optimism in the US, says Macquarie bank currency strategist Brian Redican.
“I don’t think the story in Australia has changed . . . It’s confidence in the US recovery that has been quite instrumental.”
US stock prices are running hard. Not only did the US S&P500 recover its pre-GFC levels during April, it has extended its run. The index touched a record high of more than 1660 in early trade on Wednesday.
First up, the currency has not in any way, shape or form “crashed”.
Second, there is no doubt that the strengthening US dollar is a factor. But let’s look at the Aussie versus some crosses. How about other commodity producers like Canada:
Or Brazil:
Or South Africa:
Or another China exposed economy like Korea:
Or the roundly despised euro:
Or the QE afflicted pound:
The move since April is universally against the Australian dollar. Obviously some of the move has not yet broken out of bigger sideways or even upwards trading ranges. But to describe this as a US dollar move is just plain wrong.
Something has shifted in the perception of Australia and it’s not hard to see what. The mining investment cliff approaches, business conditions are stubbornly weak, fiscal instability is growing, it’s raining rate cuts and Chinese growth is disappointing with more to come.
The MSM cheered the economy destroying rise of the dollar all the way up. It appears it will deny it all the way down. This is all the more bizarre given it is our major hope of leveling off the mining investment cliff.
