Australian dollar takes out 55s…

See the latest Australian dollar analysis here:

Macro Morning

Headed to zero today it seems:

Very nearly 54s with low at 55.11. But just wait a minute…

David Llewellyn-Smith
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Comments

      • jonathan grant

        Yep as low as it wants. It’s just lucky we have all the energy and food we need within our own country. But if the AUD goes low enough won’t it have to all be socialized?

        • Hi jonathan. I find that an uplifting comment. We can actually feed ourselves and keep ourselves warm if required.

          • bolstroodMEMBER

            Yes let us take back our country.
            The Neo-liberal Globalist regime has run it’s race and is exposed for the fraud and fantasy that it is.

        • I’m pretty sure we will follow the potato famine method of selling everything overseas and letting all the locals starve.

      • It isn’t just tradeables inflation. It is almost everything these days. Everything from gas to milk can be exported or sold internally.

        Your farmer will prefer to export his produce and get paid more in US dollars than sell it locally. Same with almost everything.

        The falling AUD will cause inflation and the RBA’s first duty is to control inflation. Raising interest rates will do this.

        • Dan – this is the most critical function of the RBA – above all else. It is however lost on those bamboozled by the new fandangled tools of quantitative easing which, to them, are the cures for everything – DESPITE the fact QE is specifically what caused all the problems and specifically is what is exacerbating the problems – hence why EU and US are abandoning while those around here keep on cheering it – no idea.

          Inflation will come – not just in the form of higher export prices for producers + import prices for non-Australian produced goods but also and above all scarcity.

          Society will be flooded with cash – that is absolutely coming – make no mistake – and coupled with scarcity and a global economy all competing to hand out more money – inflation is absolutely guaranteed.

          And what then ?

          Yup – interest rate rises – even though its a dumb move – like qaunt easing – its the only move they have.

          Price controls will be required.

          MB is way behind on this.

          • Agree, IB, can’t do this successfully without putting price controls on suppliers and merchants. That is what we have a government for, to nationalise companies in the national interest. At the end of the day, they assume all the sovereign risk, which is why we are going to get some form of helicopter money, oh except for those dope smoking dole bludgers

        • DingwallMEMBER

          The RBA won’t act UNTIL they see inflation…………… rear view mirror. They will also have to consider all the storms going on at the same time.

        • Pretty sure their first priority is something about housing. So are the second and the third.

    • Even StevenMEMBER

      Why rescue the AUD? Are you concerned about tradeables inflation (i.e. imported goods rising in price?). I think that will be a good thing and will support local manufacturing.

    • Don’t wonder – it could happen.

      The main thing that determined the AUD was always the terms of trade and our trade performance.

      With the prices of commodities falling through the floor the AUD will follow.

      If we find ourselves in CAD territory again….. a matter of months, weeks, minutes… who will be lining up to lend us money to fund our appetite for imports we once produced ourselves.

      Now of course we could have spent the last 10 years weaning ourselves off unproductive capital inflows but apparently that is the kind of approach that only Money Cranks recommend.

      Now that we have little unproductive industry left and the prices of our exports are collapsing we had better get used to giving up our imported toys or giving up more interest to foreigners or more title to our remaining productive assets.

      One of the craziest things i have been reading on this site for many months is the gleeful way people have prayed for a lower AUD.

      A lower AUD is nothing to be proud of.

      A higher AUD is always a good thing providing it is the result of productive output that is attractive to foreigners.

      Our problem has been an AUD inflated with unproductive capital inflows. It was always within our power to block those but unfortunately the neoliberal free market fanatics simply would not countenance any restrictions on capital flows.

      Achieving a lower AUD as a consequence of a collapsing international economy is nothing to be proud of.

      It is the height of madness to welcome it.

      • Jumping jack flash

        THIS!

        Is it time to enact the tried and true solution to economic depression? National industry?

        Enough of the debt and cheapening of the debt using zanier and zanier schemes and tricks and then trying to get everyone to buy some more debt when everyone clearly has had enough, or is ineligible for debt.
        All of this to create more debt to get us out of the mess that too much debt caused in the first place!

        Is it time to actually produce something useful with our abundant natural resources and skills to earn money for our country, employ our people, feed our nation, and repay our debts?

        But no, not these bunch of clowns. They will fiddle at the edges of the status quo while the whole place goes up in smoke.

      • Don’t worry, when people are paying $2.50 for a litre of unleaded and $5 for a litre of milk they’ll brush it off and bask in the glow of a ‘competitive currency’. Wages meanwhile will be stagnant.

        You couldn’t make this up.

          • As the fellow above mentions, oil won’t stay that low for long:
            – one, supply will get decimated (US fracking and other global operations)
            – capital flowing out of the sector means not much exploration and field development going forward
            – Money printing will boost the prices of most / all commodities going forward (demand shock notwithstanding)

        • You wouldn’t need to make it up… that’s the reality of life for most of the developing world. They’ll all be glad to welcome their newest member, which already has an economy to suit.

      • I think its the loss of hope that we would ever change our economic operation unless something catastrophic happened which is causing the cheering on. No one would wish we got to this situation.

      • DingwallMEMBER

        I do agree we should not be proud. But in my view it takes a crisis to get this horribly unproductive, ersatz economy to begin the process to become a healthy one. This should be the opportunity and we must take it ……….. but, unfortunately, I think in 10-20 years this will be forgotten ……….. house prices will be bubbling again, house investment will still be promoted by all and sundry, and we will be importing ALL of our TP and hygiene needs as we continue to squeeze out manufacturing and innovation for more houses.

        Australia … the lucky country.

    • They would just do what they did during GFC. That is, borrow billions of USD from US Fed to support the AUD.

    • How would it not be around 40c? 56c already, and the inevitable poor data releases haven’t started yet…not has the housing bubble officially bust yet…there is so much bad data to come, surely; t’s overwhelming…

    • It will settle where the RBA want it to settle. As I said above, RBA will just do what they did during the GFC and borrow USD to support the AUD. It is neither in Australia’s nor USA’s interest to have the AUD fall too low.

      • C.M.BurnsMEMBER

        Why does the US care what it’s exchange rate with AUD is ?

        If the RBA are competing for a very highly sort after currency. The cost swapping AUD for very highly priced USD will be significant.

        • US don’t want Australian farmers to gain a competitive advantage.

          RBA ended up profiting from the deal. Unless you are George Soros then don’t fight The Fed.

  1. For all the believers out there … this is our moment.

    6 years of sledging and disbelief. Now I am dancing.

          • Hi Burb. I hope you are doing OK among all this chaos. Regarding the RBA announcement, I think no matter what they say, watch it plummet afterwards. I truly doubt there is anything they can say that can halt the momentum. This may be hard to believe, but I think traders are actually holding back from selling until they see what happens at 2:30pm. But they already know they want to get out

          • Hi Arthur, thanks for asking. I’m ok, just some minor losses amidst mostly major gains. Currently dumping just about everything AUD…with the currency getting slaughtered, with no reason for an end yet, I see no reason to hold it in jus about any form vs USD and other alternatives…

          • Hi again Burb. friday morning now. I’ve been up half the night. You got your bounce in the AUD! Well picked, don’t know how you did it. Arty

    • Eggplant Wizard

      I’m right there with you, but do keep the human element in mind.

      A lot of people are going to die because of this downturn, and sadly not just of the virus. Try to be kind.

  2. So I’m confused… main driver?… why now after such a delay?… Does this means big players exiting and AUD bonds also getting flushed? Or is RBA about to do something stupid?

    • apparently scummo has been mumbling to the people this morning, too busy to check that though. RBA is scheduled for another hour and a half. could get rocky.

  3. Wow if they introduce QE on top of a complete currency collapse

    Epic

    Phil must be sh1tting his pants right now

      • they’re also selling Aus govt bonds though, so I’m not sure about that

        Maybe an each way bet – Phil might lose his nerve

      • Chris. Huh? Didn’t seem sarcastic to me. I thought Dom was sort of joining in on and adding to the irony of your original comment.
        This is a good time to be nice to each other

        • Whoops… I wasn’t intending to have a crack, what I meant to say that my original comment was poorly executed sarcasm.

    • DingwallMEMBER

      And the funds we needed to keep the car industry alive….. I am all for manufacturing….. just has to stand on it’s own feet not with a taxpayer funded crutch

      • But if taxpayer support is good enough for coal miners and banks, why not car manufacturing?

  4. BoomToBustMEMBER

    If I get my financial terms correct, is appears we are now well below GFC levels for AUD/USD pricing with the next level around 51

  5. On the bright side – that little weekender in Palm Beach just got a whole heap cheaper for Mrs Watanabe…

  6. Aussie 10 year has backed up to 1.5%! Is this all USD related? Surely the market is pricing RBA QE and the long bonds will be a first target? why the massive yield reversal in Aussie sovereign?

    • Breaking: Scientists now examining strange Higgs Boson permancy around RBA – slows everything it touches.

  7. Have waited soooo long for this here in CA with my USD – switch to AUD complete 🙂