Australian dollar peaking as COVID drags into 2021

See the latest Australian dollar analysis here:

Macro Morning

It’s getting towards the end of the trading year but that’s not stopping Bitcoin from pushing to ever higher record highs, nearly $24000 this morning after recently bursting through the previous HODL high at just below $20000:

Gold briefly toyed with the $1900USD per ounce level but what bears (sic) watching more closely is still the Australian dollar, with the monthly chart showing it on its way to the 2017/2018 nominal highs, having surpassed the majority of the two year trading range above 73 cents (top black horizontal line):

Westpac still thinks it’ll go back there and then some, with over 80 cents through 2021 and then the 82 cent level by 2022, as everything is peachy about the next two years, with the vaccine and the economy and you know, the vibe of it all:

They contend this is being driven by interest rate and QE expectations:

We expect that the Bank will decide to extend the program for a further six months with another $100 billion in committed purchases. Those purchases are likely to be made up of $70 billion in AGS and $30 billion in semi – government securities.

In 2022 we expect the RBA will reduce the QE program to $50 billion per six months (two tranches) and gradually raise the rate for the three year bond target through the year, reaching 0.3% by year’s end.

Notably however, the last time the Australian dollar was this overextended following a QE induced risk rally that saw the USD in a similar death spiral was towards the end of 2009, where this kind of blue-sky expectations caused a 10% drop in the currency….before then going ahead another 20% plus on a drive to parity! The difference being there wasn’t a worldwide pandemic that seems to be leapfrogging ahead of the various economies, societies and government ability – let alone the scientific community – efforts to combat its spread.

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Comments

  1. I think in 2021, Gold is going to skyrocket.

    Its still early days yet.

    I wonder how many years it’ll take before Gold replaces the Australian Dollar. How low can Interest Rates really go? Given that the Australian Dollar is basically a currency harboring Baby Boomer debt and intergenerational taxes upon Australias Young, Im surprised anyone but Boomers even uses it. Leave them with there own debts.

    Bitcoin ha ha. Chinas Laundering money into the United States again. That’ll probably end very badly.

    • I'll have anotherMEMBER

      End badly?

      Its over a decade old now, has an investment pool larger than some middle tier European countries, has been the very best performing commodity, including your precious gold, by far since it’s inception, has $bil investments held by large fund managers and superanuants, was able to rally from a bad drop to $3k Start of covid to $24k today.

      One day the Sun will blow up, and it will all end badly, but Bitcoin ain’t going anywhere in our lifetime.

      • It’s the biggest bubble in history and it’s not even close.

        It’s only remaining utility/value is that it’s a store of value, and it’s not even good at it.

        Mania writ large.

        But predicting the mania is impossible… could easily zoom past 100k and beyond, but it’ll all eventually end, spectacularly.

        • I'll have anotherMEMBER

          Eventually everything will end, as pointed out.

          It stores value quite well over the mid term.

          On one hand you say it may go to $100k and the other it will end badly.

          It allows you to hold massive amounts of currency, which can be exchanged anywhere in the world, without a bank account. It is currently the most secure store of wealth that exists if using a hardware wallet. The actual crypto ledger, for the time being, is unbreakable.

          You can carry $1bil of BTC through an airport. Good luck doing that with gold. You can offload $1bil of BTC very easily. Also cannot be done with gold. You can buy $1bil in BTC. Easy. Cannot be couterfitted. The anonimity you point out is also a plus, not a minus if you ask me in a world where governments are prying more and more into our lives. So yeah. Plenty of advantages.

          Finally, it’s digital. Trying to argue it’s a bubble is like trying to argue CDs were a bubble vs tapes. It may be replaced one day, but it won’t be with gold. Not unless society collapses.

          It has its problems, namely it cannot handle the number of transactions required for it to genuinely compete with fiat but smart people are working to fix that. That said, gold cannot make any claim here at all.