Australian dollar thumped as economy falls apart

Some fantastically irrational market action today. The Australian dollar was thumped to within a whisker of the 0.66s as building approvals free fall:

But bonds weren’t bid:

Yet stocks assumed that they were, grabbing anything with yield:

Dalian is firmer:

Big Iron is partying. It’s not clear whether it is China going ex-growth, the trade war or imminent Hong Kong martial law that’s driving the bid:

Big Gas is awesome again:

Big Gold is BTFD:

Big Banks are loving the fact that Australia is entering its worst large scale developer shakeout since 1991:

So is Big Realty:

The efficient market hypothesis is alive and well.

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 fouding 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.

Comments

  1. 4% in a bit over a week ? 70 down to 67 since the 22nd ?

    Annualizing that we get to 8 weeks at 4% falls is 48 cents in two months.

    Just a thought exercise.

    At least the USA is going to open a rare earths mine in Australia (needs to in order to maintain its missiles) – otherwise demand might you know, go oriental.

      • Do we actually have any?
        Goes to show that, after many decades of negative RAT interest rates combined with a chronically over-valued A$ subsidising gross over-consumption, we have no savings and, in order to maintain our consumption, we have been and are willing to sell every asset we have to anyone who will buy them. The US is not the ONLY one who has us by the balls.

      • Australia needs to play these two super powers off against each other.

        Become integral to both and start the bidding war for “most favoured status” (old Chinese saying from the Boxer Rebellion years).

        Australia is in the position to control the entire southern hemisphere within Asian shipping region – we have standoff capacity that is completely untouchable and would afford us both economic and military power to the point of being untouchable by either.

        A neutral south arbiter providing strategic military offerings to both (all) rival powers with a clear mandate of strikes based on certain agreed upon provisions.

        Our southern ocean providing the only alternative navigable route entirely untouchable by anyone.

        There it is – thats the way forward. Screw them both over hard.

    • Let’s not forget that in the last 3 weeks Corelogic’s Sydney index has increased at an annualised rate of about 35% pa.

      Where this came from I have no idea. Where it’s going I have a pretty good idea.

      Meanwhile, with the ASX up over 100 points (about 1.7%) today…yeah nah. I could be missing out on an intense ribald share market super boom, but given all the negative action going on in the real world I’m quite happy to miss out on that and enjoy my safe and modest returns.

      • Hi LSWCHP
        Been in Sydney RE for 25 yrs. Same in Qld where I am now. These stats are bullshit. How they compile them us telling. 1. The Auction agents don’t want to publicise abject failures so no data there . 2. The sold component takes into account sales post Auction within 2 -3 days especially weekend jobs .3. The HB figures again crap as no distinction of Vendor Bids which are used frequently. The internet portals just want to keep that advertising revenue coming in.

      • I use a local bank account that is $USD denominated. You can get better exchange rates via platforms such as CurrencyFair. The rate the bank offers is dog bollocks.

      • In addition to holding USD direct, you can also do it via proxy, eg. via ASX ETFs “USD” and “ZUSD”.

        There is also the “YANK” hedge fund (goes up when AUD goes down), where is a AUD/USD pure-play, as its opposite “AUDS”.

        There are pros and cons for each option.

        For convenience, and a lack of effort to setup a USD account (though I may change that sometime :P), I use USD, ZUSD and YANK.

    • I just took some profits on my USD this afternoon. So that’s why there is a market!
      I think AUD is ready for a bounce , no real reason just to shake out recent shorts.

  2. How long until the falling AUD causes a rise in prices of imported goods in Australia, stoking some inflation?
    Will inflation make the RBA raise rates or is that no longer their concern, only property prices?

    • Jumping jack flash

      CPI no longer has as much effect as per the announcement almost immediately after Fearless Phil took the reins over from Stalwart Stevens.

    • I think the RBA will discern the difference between (“look through”) imported inflation and debt-related inflation; interest rates only really affect the latter, and there’s no point crimping debt if the inflation is mainly imported…

    • I suspect it’s beginning to feed through now. COGS ties to the stock turn cycle so you would expect sustained pressure after 3-6 months for your typical whitegoods / imported items? Good reason to bring forward any near term buying plans for consumer electronics etc.