ASX staggers as Australian dollar goes ballistic

A currency shock is being unleashed upon Australia:

How high it goes is anybody’s guess. I still say low 82-83 cents with DXY falling further yet as EUR powers on. But everything is sure getting overheated.

Dalian is falling:

The ASX is staggering under the load. Big Iron is trying but can’t get far:

Big Gas is wilting despite the oil bounce:

Big Gold is at least turning as the DXY flight turns rout:

Big bubble is struggling:

But Big Liar is running, I guess as the RBA can’t hike:

Not that it was ever going to…

I am off on two weeks break today. So I wish you all the best. I can only urge one final time to take advantage of the Aussie as it flies towards a several standard deviation overvaluation straight into a domestic Australian slowing and Chinese bulk commodity tipping point. Here’s the latest Westpac chart:

It ain’t going to last!


Disclosure: I’m the strategist for the Macrobusiness Fund which is currently overweight international stocks. We also run an international equities fund. Both of these will benefit from a falling Australian dollar so I am definitely talking my own book.

Register your interest in the fund and we’ll be touch.


Houses and Holes
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  1. AUDUSD 87-90c looks likely to me. More importantly AUDCNY is at 5.42 which is back to around 2014 levels. Still a tad low, fair value around 6 for mine, and that would act as a 10% “foreign buyers tax” on Aussie property.

    • That’s terrible, we need to LOWER TEH RATES and LOWER TEH DOLLA to help with our export orientated industries like real estate! MB told me so.

    • Highly unlikely considering the RBA isn’t going to tighten in the next 18 mo. The loon has also shot up (as has the kiwi) so it has very little to do with AU and more to do with expected returns (CAN bonds have shot up 400% in a couple of months). Should the RBA fail to raise again in Sreptember, and with the CAD gardually going negative, 82 is the best you can hope for. Also lets see what happens when those reinvested treasuries slow down (still on).

  2. C.M.BurnsMEMBER

    Ooo ooo I know this.
    Raises hand
    Teacher, teacher, the answer is cut teh rates

  3. they can’t fkn cut the rates because they have a gorilla going ape shit in the housing market…how fkn sensible and obvious does Labor’s negative gearing reform look???

    • How about instead of singling out particular groups and enterprises for punitive taxes that aren’t applied to others how about we fix the damned economy instead…but nah!!! That’s too hard!!!! Has been for 60 years and that’s why we are where we are and heading for hell in a wooden cart as a society.

      • What ????

        No need to fix something that’s worked so damn well for the last 30 years. Also, no need to tweek it either. Look this great position:
        Low and stable wage growth [ = good for the currency, inflation, interest rates and employment ]
        More balanced growth [ = less dependence on external factors ]
        Strong emphasis on building the nation, via investment in housing
        Attractive to foreign investment, latter results also from the steady, 25 years of uninterrupted economic growth, and to migration = wonderful testimony to Australia that so 200 k migrate here annually. This is great for prospective growth and diversification of the nation, and other considerations.

        We prosper economically – despite whatever ; that means, flawse, that you can offer whatever you may, but it’s actually immaterial, in the nature of : ‘ It’s worked so well here for the last 30 years [ = uninterrupted economic growth, despite dis-appointments ] , there’s no need to fix something that ain’t broken and cannot operate anymore effectively ”

        The self-adjusting mechanisms in free-markets have shown us that they have delivered the most efficient outcomes = the growth record, being the second-longest growth record in the history of the WORLD.

        One person’s views of a contrary nature matters NOUGHT , therefore – that’s the logic = so, don’t offer anything else to attempt to negate the highly effective operation of the Australian economy = the record’s there in the ultimate value-added concept, the latter being our economic growth record. Period !!!! – nothing anyone offers now can be used to suggest that it could have been better, please understand/respect that.

        Cheers, and all the best.

      • Congrats flawse, you have been trolled by UTF/Nuisance/… I miss our iron troll. At least he could write coherent paragraphs.

      • Some of your thoughts, really. ASX 200 [ XJO] has never been above 6300 in the last FIVE years.

  4. DingwallMEMBER

    The RBA have to sow their own seeds…….. When is the next idiot stepping up to the podium to talk ? I can’t wait to hear the naivety flow, carrots and all !

  5. Sydney housing market is hijacking the economy and the monetary policy.. There’s no other country on earth where one city dictates monetary policy and charts the economic path for the whole country..

    • Just Sydney, oh and Melbourne. And Canberra, Wollongong, Newcastle, South Coast, North Coast, Gold Coast, Southern Highlands, Blue Mountains, Hobart. Regional NSW markets are now rising at 10-20% p.a. still affordable by Sydney standards, but unaffordable to locals.

    • proofreadersMEMBER

      Too true 2big2fail.

      Was told over the weekend by a friend that their ex-neighbour’s father had recently been offered $3.2m for a 3BR apartment on Sydney’s mid north shore, bought off the plan 12 months or so ago for $1.9m and still being built.

      Crazy – but Straya is different.

      • if you ask me monetary policy in Australia is being run for Perth, not Sydney. Rates were too high in 2011 when resources were booming, now way too low thanks to iron ore crash.

  6. this is going to be bigtime short term (?) pain for me. 2/3rds of my assets are in u.s equities bought between .72 and .75.
    i’m cooked.

    • have to wait it out, I’m still all cash lol, been so for ages, just cannot commit to anything

      • I tried “waiting out” the GFC with disastrous consequences. Not suggesting this is going the same way, just that “waiting out” isn’t always a good strategy. Re-evaluate your investment case, where you think its going and if it doesn’t stack up take a loss and sell.

        Forex IMO is far more difficult to predict than stock markets, it doesn’t stay directional for long, you have to balance fundamentals on both sides of the trade, and the timing doesn’t often suit your thesis.

    • Don’t focus on the price you bought in at. You own the USD assets that you own. Focus on the value of the assets now – is it likely to improve from here or not?

      If you believe the AUD is overvalued against the USD and will drop in due course, then holding USD assets is a good place to be. If you think the AUD is staying high long-term you might want to bail out. Or wait it out and use some of your USD cash to buy something that hedges against your current currency risk – I dunno, what, but basically something that goes up when the USD is down. (US exporters I guess).

      • It really complicates things when you have FX and equity market to think about in combination. Its possible to buy currency hedged ETFs and warrants but usually just over an index not sure if you can buy stocks or options with a currency hedge.

      • Yes – a currency hedged international ETF removes all currency risk in theory (for a slightly higher fee). Although even then you can tie yourself in knots if you want, because it outperforms an equivalent unhedged ETF if the “home” currency currency goes up but the unhedged one goes better if the home currency drops.

        My original point though was that you could invest some of your USD assets into something that does well when the USD is low, and this could offset some of your AUD forex losses caused by a dropping USD.

        Personally I think the AUD will drop again in time and you’ll be fine but honestly who can tell, I could be hugely wrong, it’s happened before!

      • Perhaps buy your USD nominated assets as usual and then use CFD to hedge that currency exposure? You could even do a short position on AUD if you think AUD is high enough and make money on that short position once AUD goes back down to your entry prices of 72-75c. This profit essentially resets your entry into USD assets at a higher AUD compared to 72-75c.

  7. HadronCollision

    time to send AUD to HSBC USD account
    Meanwhile my affiliate income earned in GBP is taking a wack

    Swings and roundabouts

    Lucky we don’t live in Syria

      • HadronCollision

        It’s an HSBC Multi Currency account, I just direct EFT from one AU account to it’s AU equivalent.

      • HSBC fuck you hard on the exchange rate (both directions)

        Did you think they weren’t going to find a way to fuck you ?

      • You do the FXchange through an outside FX exchange to reduce the cost as you go from one HSBC account to the other. HSBC usually has a fairly wide spread.

      • Looked at HSBC multi currency account years ago and agree with others that the spread is just way too big to keep that account open for transferring between currencies. CFD is way cheaper if you want to move between currency exposures.

      • its 50 pips. 10x what dukascopy (forex) charges… still miles ahead the retail rate of any local bank.

  8. man had a strangle 80 calls / 79 puts at the start of the week, and made 3 pips. 3 stinkin pips with 2 trades :/

  9. You would have made around 60% trading Westpac’s fair value graph. How do they calculate it?

  10. Couldn’t they print and buy up assets, say gold? Wouldn’t that put downwards pressure on the AUD without interfering with rates?

  11. Give the dollar seems to have a mind of its own now, is there any reason not to raise rates now.
    I would like to earn some more on my bank deposits if thats ok with the banks.

    • If they raise the rates the bubble bursts and Phil’s head ends on a pike. If he holds he can blame the PM when it blows. As for the banks, they are not going to give you anything much. Mortgage rates will edge up and depositors will get zilch. Deflation here we come.

  12. Peter Gold Bug Schiff on his video today said the US had topped and the Renminbi had bottomed. He said the Chinese economy was in recovery as were commodity prices. I am glad I didn’t panic when the AUD went high 60s to the US and all the articles in the Age were about AUD heading for 60 cents.

  13. David, as someone who has now put skin in the game with the fund, a couple of thoughts. Whilst the pilot fund seemed to be doing well, you were happy to tell us your moves in retrospect It’s all gone a little quiet since the AUD has skyrocketted. You could perhaps start sending emails to those that have opened accounts explaining what the strategy is going forward. Not having a dig or whinging, just noticed the lack of commentary on direction when the aussie turned. I suspect its taken a bit of a hit with the AUD going bananas, but thats to be expected, you cant win all the time.

    • The Traveling Wilbur

      I wouldn’t panic about AUD holdings within the fund. You’ll probably find they’re 40% vested in property : ).

  14. BubbleyMEMBER

    This time last year we were expecting the arse to drop out of the AUD in 2017 and speculation was that it would drop to .60 or even .50 or lower.

    Now its done the exact opposite. I need a better crystal ball, this ones busted.