Australian dollar pulverised as yuan lets go

The Aussie dollar is getting pounded this morning:

As CNY lets go in a massive acceleration of the trade war:

Stocks are being dragged in:

And the bond is out of control:

Iron ore is off the woodshed:

Big miners are getting flushed:

Big Gas thinks its immune, stupidly. Low growth will kill oil:

Big banks likewise. Low yields won’t save them:

Big Gold is mixed, weirdly:

Big Realty is letting go of the ScoMo miracle:

The falling CNY is a recipe for instant global recession as EMs choke of diving competitiveness, capital flows into the USD, and Trump redoubles his trade war.

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

  1. See, this is the thing…..I’d like to go long gold stocks for the medium term, but things feel so toppy that I fear a rout and rush home to the USD, crushing gold…

    Sure is a lot of uncertainty right now…

    • C.M.BurnsMEMBER

      the USD Safe Haven bid has been a reoccuring theme and trade strategy for several of the commentators and contributors on the Macrovoices podcasts.

      Given the rapid breakdown in conditions in Europe and China, it makes a lot of sense to me so I’ve been positioning my own assets accordingly.

  2. No reflation for Australia. We’re going into our first recession in 30 years; it’ll be nasty, because it will be a debt crisis to boot.

  3. Think it’s a little concerning that DXY is actually down???
    USD index doesn’t seem to care.
    Think mid 67s is an opportunity to take profit on short AUDUSD positions.
    If DXY stays weak short term, a cautious long AUD here might be a good trade.
    It’s always hard sticking your neck out
    Think AUDUSD maybe over sold here

      • Coming let’s see
        If we can break 6840
        Market is a little short
        My gut feeling from ages ago was that we would get a short squeeze from 66s when everyone gets bearish
        Let’s re assess if we hold this mid 67 level
        I want to see 6840 level break first
        Let’s chat in a day or 2 and see what happens
        I think we have to have a short squeeze at some point around here
        For me I wouldn’t be sitting short down here
        Feels like a bear trap

        US 10 year yield seems to have fallen a very long way too, is the US 10 year bond over bought now a little ?

        Seems like chaos out there

      • The problem with AUD positioning is that the USD was at 4 mil short contracts not long ago. It’s only now re-balanced to a more neutral level; with room for long positioning to rubber band relative to the previous short position (more USD strength).

        The AUD is but flotsam in the USD storm, with market positioning on AUD largely irrelevant at present.

      • @bcnich. See my comment to previous AUD news post by H&H.
        It’s hard to get a short-squeeze when almost no-one is short. At time of my making this comment sentiment is almost 5:1 long on the AUD.
        A long-squeeze is far more likely, even allowing that the Aussie is already oversold to bujjery. Even ‘though I think it’s going to bounce, I wouldn’t touch it with a long stick today. Sentiment like that is vulnerable to a flash crash

    • DXY has been unquestionably strong over the last few months in circumstances that should have seen it weakening (in isolation); it rallied off the FOMC cutting rates!

      Expect DXY to continue to have strength for the same reasons it has for the rest of this rally – the US is the only flickering light, albeit flickering.

      • If the Fed start slashing rates like that, it’ll be because the world has gone to shiz; USD will be strong on safety trade.

  4. Quadrupled my $500 short 😋.. nice chunk of change

    Oh.. and I have most of the cash (stock) in USD, including my super 😎

    • Good stuff.

      But, stay diverse. I’m AUD bearish.

      Remember that the Trump will probably go to war with USD and the Fed soon, and will want to smash the USD….it’s just a question of whether stocks will crash in the meantime or not…I really don’t know.

      I hold a lot of USD and AUD shorts, but plenty more AUS and US bonds, as I’m much more sure about the IR trajectory than the USD trajectory. For me, bonds seem less political (slightly!) than currencies, so I’m happier to park my cash there for capital preservation, some minor capital gains and minor dividends.

      Not advice, just saying that some diversity is good for capital – I think capital preservation and international buying power for AUD earners (like myself) going forward.

      My 2c

    • Mav, you can buy various bond funds on the ASX, as well as govt bonds directly. Each have their pros and cons. If you want more info then post tomorrow morning and myself and others can provide some options for you to consider.