Australian dollar crashing

by Chris Becker

Some epic volatility in the FX market at the moment with Yen moving both Aussie and USD around:

This is very troubling indeed, with the lack of liquidity as key levels are taken out really showing how volatile and dangerous the FX world really is – and why most traders don’t hold positions overnight!

No news event to precipitate such a fall either, which is doubling troubling, although the China slowdown narrative (via the latest Apple missive about its Black Mirror sales in the Middle Kingdom) has some legs, its not enough to explain….this….


      • Do we even grow that anymore?

        On a more serious note how does MB like their popcorn? I always buy the plain popping corn you have to pop yourself in a pan and then sprinkle salt on it. I remember the first time I had popcorn in China and it came in a bag already popped sprinkled with icing sugar. I was horrified (American import – yuck).

        I’m in the salty popcorn camp

      • Put some kernels into a bowl. Very lightly oil and mix through.
        Tip kernels into a brown paper lunch bag.
        Fold corners over, slightly tear corners in a way you can fold the rips so it remains sealed.
        Place in the microwave for a few minutes and watch closely.
        Stop shortly after popping begins to slow & before the bag catches alight 🙂
        Open bag and tip in preferred seasoning, close and shake.
        Open bag and eat.

      • I remember that sweet Chinese popcorn from the Lianhua it was vile.
        Than of course you had Metro Pizza that was equally vile and not to forget Goldmine Pizza (Yuck absolute Yuck…worst Pizza I’ve ever ever had the misfortune to taste) Terrible stuff even the locals wouldn’t eat it.

      • @fisho I don’t think I sank to those lows, but being in Beijing I had some advantages. Best spaghetti I ever had was in northern Yunnan after 6 weeks travelling in the far western back blocks of sichuan and qinghai

      • I don’t think I sank to those lows what?
        My image of you as a Chinese street food junkie lies in taters.
        How can anyone really live there without at some point surrendering to the aromas of the alley?

      • @fisho, I should have been clearer, you were talking about pizza/western food. I’ve eaten all sorts of alley and canteen food, never fear!

  1. CanuckDownUnder

    Must be karmic retribution for selecting Marcus Labuschagne at 3. This has to be a new all-time low in selection decisions made by Cricket Australia!

    • @Al
      Yes – relying on any paper fiat is fraught. Those in US$ should expect the worst in due course.

      • C.M.BurnsMEMBER

        What currency is going to be stronger than the USD, even over the medium term ?

        China is cactus.
        Euro zone, euro banks (deutche and the Italian ones) and the Euro are all doomed
        The yen will so okay, but can’t see Japanese economy out-performing the US if the US tanks as you predict.

  2. This feels like the prelude to when Bear Stearns died. Market was awful for a while then started falling rapidly no one seemed ot know why then all hell broke lose and turns out whole economy was built on massive fraud .
    But this time will be different

    • But but but but, the talking heads on TV assured me that Australians were going to spend billions more than last year …..

    • truthisfashionable

      Maybe boxing day will be the partial saviour.
      I just came back from walking around Macquarie centre, lots of sales but hardly anyone buying it though.
      The longest queues were for coffee and at bigw buying back to school stuff.
      Myer was a ghost town even with it’s generous discounts on overpriced stock.

  3. Feels like a technical manipulation to gains some short $$$…reminds me of when gold was taken down technically a little while ago…

    Isn’t there basically just empty space below the AUD now? And, with the holiday break there is probably low volumes? Sounds easy to manipulate.

    Not that I’m complaining – I have large short positions on AUD/USD cross and have made a killing today, hut does seem oversold.

    My 2c

      • Even in the absence of ‘normal’ liquidity it’s rare that you can lean on a major currency and move the dial to that degree.

        Someone is unwinding some serious risk somewhere in the financial architecture.

  4. Jeebus, my long USD and Euro positions just got sexier.. but for how long? I wanna cash out of stocks now! But must wait to Feb damn it.

  5. I hate to say it but I suspect we’re seeing the beginnings of an Aussie Liquidity crises. Lots of warning signs and the dollar getting hammered, I imagine this is something that is getting a little out of control because most at the RBA are still on vacation. But what can they really do?
    All I can say for certain is that it is clear which direction the Hot money is flowing.

      • Will we now get the delusional run in stocks, breaking the 2018 highs and have the pundits screaming “2019 is the year of stocks; property is for amateurs!” only to have Nineteen Eighty Seven Part II castrate the market (having never reached the historic pre-GFC high – disgraceful)?

        I’ve been selling down over the last six months (now ~60% cash, 30% ASX and 10% USD) and wonder if it is not the time to completely ditch the ASX and pray for secure employment and household for the next decade?

      • Lots of reasons that this could be just a logical (somewhat automatic) portfolio adjustment, when the stops get taken out on one section of the market it causes this sort of automatic readjustment. The so called “flash crash” resulted in lots of anomalous data because hedge positions that made perfect sense 10 mins before were absolutely insane positions after the crash, which had everyone second guessing the real market direction.

      • Aus rates signaling lower in Bonds, supports equity valuations…but dont worry, the US plunge tonite will sort out these guys running around looking for safe place to put money…it will be a different story tomorrow.

      • Pretty standard move — the ASX is much cheaper to buy now that the currency has tanked. This has nothing to do with stock fundamentals

      • Yep exactly mirrors my thoughts on the subject.
        but what can you do, a good trader adjusts their strategy to suit the market none survive with the belief that the market will adjust to suit their chosen strategy.

      • kiwikarynMEMBER

        I just added some retail property stocks to my list of shorts, joining the banks and the property developers. So far this bear market has been stress free, being all in cash plus selected shorts.

      • The RBA, as the RBNZ has told us, will likely DROP the Cash Rate to ‘balance out’ the effective cost of funds to local institutions. Madness I reckon, but that’s what’s likely, and well-done MB for seeing it so long ago.

      • Mr RobertsMEMBER

        Hi Karyn, any recommendations as to a good brokerage, or are you online trading? I can’t seem to find anyone that will help me with sort positions.My knowledge of the mechanics are limited.

      • kiwikarynMEMBER

        Interactive Brokers. They offer shorts on around 100 odd stocks. Plus CFDs on a lot more but I don’t recommend leverage in this volatility.

  6. Regardless of whether the RBA keeps the interests at current levels or decreases, correct me if I’m wrong but the banks will need to raise rates just to finance the cost of borrowing from overseas banks and the raising of bonds? Would this flow to domestic borrowers in Australia?

      • proofreadersMEMBER

        Yes, but as they raise borrowing rates and pay more for offshore funding, they will screw domestic depositors in tandem with the RBA. At least, borrowers get notice of rate changes, domestic depositors get no notice – they are just expected to take it up the anus.

    • Diogenes the CynicMEMBER

      Yes that is what happened during the last GFC…but the RBA had plenty of ammunition to help out both by cutting rates and buying their junk. This time around the banks will be raising rates into the recession which won’t end well for borrowers…

    • Even StevenMEMBER

      No. I don’t believe so. Bank funding costs would increase only where there is an expected continuation of declines in the value of the AUD.

      Furthermore, banks existing funding arrangements are fully hedged so there’s no loss being incurred by the banks and therefore no need to fatten margins in future to offset past losses.

      EDIT: Funding costs rose during GFC for other reasons (perceptions banks were unsafe, liquidity drying up). You shouldn’t automatically equate a decline in currency to a rise in funding costs of banks.

      • Cost of hedging (and therefore all-in cost of borrowing) will rise if volatility like this is observed often enough.

        You’re right that Existing borrowings are fine, because they are fully hedged.

      • Even StevenMEMBER

        Yes, agree regarding higher volatility leading to higher hedging costs (and ultimately higher cost of bank funding). I expect this is probably a second order effect unless volatility has dramatically increased.

  7. scottb1978MEMBER

    It was at this level in Jan 2016 that I bit the bullet and moved some money to USD. Of course since then it went up like a rocket and only now 3 yrs later is it retesting those levels.

    • For me it was 2007 so news today it’s back to 10 year lows….. well it’s a momentous day.

      I am if nothing else, extremely patient.

  8. FX market will be anticipating an ALP victory with lots of crazy spending as we move closer to the next federal elections.

    On top of that we have the impact on our exports of a slowing global economy (especially China) and perhaps some real mad policies by the RBA to hurt the AUD.

    A pity the better goldies took off in October and are now fully priced, unless one is anticipating gold at AUD2,000, which I think could arrive this year.

  9. Are Global investors waking up to all the BS the Australian govt has been fudging numbers for years. Maybe but not for long

  10. Can someone please annualise the compound losses on property over the year, combining the drop in prices and the drop in the dollar?