Memo to MSM: Australian dollar is not strong

See the latest Australian dollar analysis here:

Australian dollar pops and drops on Evergrande vs Fed

The Australian dollar safe haven garbage just keeps coming, mostly from Dumbfax:

The Australian dollar is proving resilient to the threat of a downgrade of the nation’s triple-A credit rating.

Just after 1pm on Friday, the currency was trading at US75.03¢, little moved from US74.99¢ on Thursday.

OANDA Australia and Asia Pacific senior trader Stephen Innes says Thursday’s downgrade of the outlook on Australia’s sovereign credit rating has not caused any real currency shock waves.

“While I expect the yield appeal to keep the Aussie buoyant as the dust settles on the Brexit fallout, the rating agency credit woes are smouldering,” he said.

And again:

The Australian dollar has been unflinching in the chaos of Brexit and was untroubled by Standard & Poor’s putting the sovereign AAA rating on notice for a downgrade.

Right now, global investors perceive Australia to be immune to the problems looming for Europe, and the Reserve Bank of Australia has not joined the bigger central banks in negative interest rates territory.

No. Here is the Aussie versus the global basket of commodity currencies since the current dirt bear market rally began late January:

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The Aussie has seen the weakest rebound of all commodity currencies on every measure and by considerable margins. The Australian dollar has benefited from a global shift to buying dirt as the US dollar has weakened along with the US tightening cycle but within that context its relative position is eroding quite swiftly.

That is the good news story here, not that it is holding up well. Quite the opposite.

Houses and Holes

Comments

  1. Found out there are warrants for AUDUSD offered by Citi today. Remembering back to how to hedge against housing collapse I believe MB were under the impression we could only short banks in this way, well turns out you can short AUDUSD using mini warrants also.

  2. BoomToBustMEMBER

    Perception is reality. This whole thing is now a confidence game, once confidence goes, so does the market.

    • Perception has never been “Reality”…it can only ever be someones reality or some entities reality. But it doesn’t have to be your or my reality. Perception is reality is a wanker saying of the 1980’s

  3. Why the obsession with AUD? It seems fairly valued to me. It didn’t rebound like the RUB or the BRL because it didn’t fall as hard. Its been trading in a range for over a year now, if its going to do something more interesting its going to need a strong catalyst.

  4. But isn’t AUD being driven up by capital flight and those looking for AUD bonds that probably pay better than many other places in the world right now? Our interest rates are at record lows but still higher than many other countries.

    • Spot on you will find the game is not a play for yield but growth ..understand that when yields go down the price of a bond goes up. A shift from 2.5% to 2% is a 20 percent gain. From 2% to 1.5% is a 40 percent gain. Of course Australian Govt Bonds are being bought and this is propping the Oz up. Why wouldn’t you with those gains on offer. But don’t be the last holding the parcel when it turns and it will..blood bath to follow.

  5. I spoke with my foreign exchange broker the other day and he mentioned that the Aussie dollar is being propped up because it is the preferred “carry trade” currency as our interest rates are still much higher than many other countries.