Australia dollar resumes tumble as risk pukes

By in Australian Dollar, Featured Article

| 28 comments

DY fell sharply Friday night as EUR rose and CNY fell:

The Australian dollar resumed its decline across DMs as risk puked:

EMs were worse:

Gold was strong:

Oil held on:

Metals didn’t:

Nor miners. Goodbye RIO:

EM stocks fell:

Junk lifted with oil:

All bonds fell:

And stocks too:

The global economy keeps on slowing across countries and metrics. China is struggling to lift:

Europe is sinking still:

The US is trailing both down:

Trade war impacts get much worse for years yet:

Trade indicators like bunker fuel, used to to power ships, are cratering:

And less trade means less demand for the Australian dollar. Much less:

More Australian dollar weakness ahead as risk pukes into weakening global growth.

Houses and Holes

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

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Comments

  2. bcnichMEMBER

    Think in the short term AUD, will be driven by USD, looks like we might have short term weakness in the USD index, that’ll drive AUD higher initially. Give a chance for CNY to strengthen under 7 again
    For me I’m bringing some USD back into AUD here, because if you hold USD in the bank you’ll probably lose them when the banks go under. Someone in one of the big 4 treasury desks said foreign currency accounts will get wiped in a bail in/out
    Even if AUD falls you’ll be getting zilch
    Think AUD may bounce out of here
    If we see that along with US equities sold off, that’ll really push ASX lower and bonds still higher
    Think the key now is USD, think everyone knows the world other than US is a disaster and will be cutting to zero
    Think for everyone knowing what to do now is very hard to protect your money.

      • bcnichMEMBER

        Andrew
        This is just a reality, you can’t have the excesses without paying the price.
        There are great opportunities
        I’m bullish ….,.
        Long bonds
        Long (short dow ETF)
        Overall hold USD too
        Get long Dow and ASX on a major sell off
        Wait and get long precious metals metals miners, Agri equities and buy a 2 bed Art Deco 2 story block unit in great spot for rental income
        Be diversified and rent your main home for next 5 years at least
        I’m bullish all these things
        There will be banks after the collapse maybe 2 big ones in Australia after the financial crisis

    • Arrow2MEMBER

      I certainly agree that I wouldn’t want to keep much cash in any Australian bank account that was not covered by the deposit guarantee. Foreign currency accounts onshore are a good example. Check the fine print on your offset account too.

      • Arrow2MEMBER

        Bcnich, those are great questions – I don’t have either of those accounts so offhand I’m not sure. Definitely check on nabtrade, that’s definitely the kind of account that could slip through the net. Google will tell you in no time, the nabtrade website FAQs should say so.

        Offset account – really not sure again. Check the fine print there too. Sorry not much help except hopefully to make people aware of the need to check.

      • Mining BoganMEMBER

        We’ve been asking about cash in trading accounts for years. Nobody can give an answer so I’m guessing not covered.

      • tonydd

        I am interested to see if paper gold gets tested as concerns mount and some investors might wish to articulate to physical. A run on the paper gold peddlers might be the precursor to some currency crises including AUD. On another note, Westpac backing peak speculation losing up to half a billion on Ralan surely makes it the first unquestionably strong bank to fall victim to incompetence and greed. Westpac = poo !

      • Arrow2MEMBER

        Tony I would expect Westpac would have security for their 500m, those banks don’t mess around in deals like that. It’s the unsecured creditors who are last in line that need to worry.

        Westpac just have to hope their security isn’t an apartment tower that is about to fall down!

    • Kolchak

      Why not open a bank account in the US to hold your USD? Safe from future bail-ins of Australian banks.

      • bcnichMEMBER

        Not sure how to do that ?
        I wanted an acc at B OF A
        Don’t trust the Americans, they’ll probably take aliens money
        Trying to get out of the banking system all together at the right time
        Want to get out of Aussie bonds too
        Don’t want anything to do with government or banks
        Scum bags

      • Arrow2MEMBER

        Kolchak my personal experience is that it’s bloody hard if you aren’t a US resident.

        Bcnich the Schwab account I mentioned in Weekend Links is a US based USD brokerage account with an Australian arm for service / assistance. You can buy US bonds, stocks, ETFs and options. Also cash in a US brokerage account is guaranteed by the US govt to USD100K (if my memory is right) – not that I keep much cash there, I prefer t bills which are cash-like but are even safer and earn a better return.

  3. Penguin4

    ME bank has more on the looming Aussie recession:

    https://www.smh.com.au/politics/federal/households-feel-pinch-on-jobs-and-wage-concerns-20190810-p52fu6.html

    Stagnant wages and growing concerns about the state of the jobs market is now weighing on the financial comfort of Australians with a new survey revealing hundreds of thousands of households barely holding their finances together.

    Ahead of key wage and employment figures, the ME Bank six-monthly survey of financial comfort suggests the long period of slow income growth is leaving many people struggling to cover day-to-day bills.

    Despite the federal government’s tax cuts and falls in official interest rates, the survey found a drop in financial comfort for most Australians since February

    About 40 per cent of surveyed households spend all their monthly income. One in five households said they did not think they could raise $3000 in an emergency.

    Almost half of respondents ranked the cost of necessities as their biggest worry with 34 per cent putting cash savings on hand as a major concern.

    But Mr Oughton said while households were optimistic about the overall property market, the large level of debt being carried by many Australians was front of mind.

    “It’s evident that despite the latest monetary policy changes, there remains high levels of housing debt worry and actual payment stress among Australians,” he said.

    Economists are expecting figures from the Australian Bureau of Statistics to confirm slow wages growth with the latest wages price index tipped to show annual growth of 2.3 per cent.

    There are also expectations that Thursday’s employment report will show a slight increase in the national jobless rate to 5.3 per cent through July.

    …
    I don’t know why people have become optimistic about house prices. Just wait for a few to be forced to sell because of cost of living and this bull trap is done.

    Fear and panic to set in soon enough. No L shaped looser plateau. The s bend of doom is here. The poo and the houses valued in poo are gonna get flushed.

    • bcnichMEMBER

      Penguin
      A lot of the jobs are coming from resi construction, wait til that finishes, we will be wishing for stagnant wages
      I spoke with a guy on Saturday who has no idea on economy, works in car industry and said he had 2 friends with loans turning p&i, repayment 50% higher and they didn’t know what to do, he said they couldn’t afford the repayment
      I gave him a run down of the lay of the land and he had no idea

      • Popcod

        It was very kind of you to take time or from your busy day to enlighten him. What was his reaction?

  4. The Traveling Wilbur

    That Bunker rates vs MSCI world stocks chart is oresome. Never seen that one before. Looks like those shipping rates updates (supertanker size) that used to be posted here for a long time by a dear reader were at least close to the money. Probably spot on.

    That chart tells me it’s time for us to batten down the hatches and bunker down (heh).

    • bcnichMEMBER

      Could run for a while be careful getting short too soon
      If things play out, we may see low 70s
      Think you need to take a smaller position and run stop loss further out
      I’m going to re enter at 7100/50 SL above 73

      • The BurbWatcherMEMBER

        I can’t see it getting above 70, let alone 73….would take some serious USD weakness absent further AUD weakness, and the AUD-related news flow is not good.

        I agree that AUD is oversold, but could even a technical move plus USD weakness see it above 70.0??

        Honest queries, as I can’t see how it could shoot up too much further…

    • The90kwbeastMEMBER

      I’d be happy to re enter honestly around .69 or the 35 day ema, going to set stop losses fairly wide just over 0.71 last high