Kappie Posted June 11, 2013 Report Share Posted June 11, 2013 HiThis might be a stupid question, but please help me understand.... For a while the Aussie dollar was stronger, against the Rand, than the American Dollar. Now the US$ is again stronger than the Aus$, against the Rand.Can someone tell me why? Is Australia doing worse economically or is the USA getting stronger again after the recession?Please help (and don't laugh if this is a stupid question - lol ) Quote Link to comment Share on other sites More sharing options...
GideonVD Posted June 11, 2013 Report Share Posted June 11, 2013 Or is the Ozzy being brought back into line from what's considered being over-inflated, and the Rand still suffering from being under-inflated?Rand under-inflated? No. Everytime Zuma opens his yap the Rand gets decimated Quote Link to comment Share on other sites More sharing options...
Bams Posted June 11, 2013 Report Share Posted June 11, 2013 My mom always said no such thing as a dumb question.I dont have answers, but like your question. Wish we could get out while exchange rate is still ok... 1 Quote Link to comment Share on other sites More sharing options...
Jordy Posted June 11, 2013 Report Share Posted June 11, 2013 I dont know the exact answer but the ARB cut rates about a month back and I saw an immediate effect on the Aus dollar weakening. Something to do with Aus still offering one of the best interest rates and investors therefore buying dollars. With the drop in interest rate they sold aus dollars. But maybe an economic expert can answer. 1 Quote Link to comment Share on other sites More sharing options...
Gerhardk Posted June 11, 2013 Report Share Posted June 11, 2013 I am not an economist but my take on it is the following (similar to what was noted above). With the high Australian interest rate and the stability of the country / natural resources etc and the instability in Europe, global fund manager not sure where to invest tend to go for AUD since at least there is a return where USD investment yields hardly anything.So if you follow the AUD vs USD the last couple of years, the AUD used to be around 0.75 to USD but since money flowed to Australia thereby creating a demand, the price went up (demand vs supply). The AUD have been hovering over parity and I think as high as 1.10 but most forex commentators note that it is overvalued to USD. So much so it is hurting some local businesses since it is cheaper to import some products from the US - can you believe that?Anyway the drop in interest rate definately had an effect and then you have the poeple effect i.e. nobody wants to left stranded when a price falls. But economically Australia is small to US, US is the big stable economy (arguably). So if you want stability you buy USD.So the same ratio that AUD moved against USD there is similar move against ZAR.I think the ZAR is affected by politics and sentiment a lot more, which does not really influence either AUD or USD since it is mature countries.So it is quite possible for the AUD to return to 0.75 to USD and stabilise there so it should be cheaper from ZAR to AUD, assuming ZAR does not continue to devalue against the USD and AUD. 1 Quote Link to comment Share on other sites More sharing options...
Brad76 Posted June 11, 2013 Report Share Posted June 11, 2013 The instability in the mining sector is a big contributor to the Rand's current volatility. Sadly, it's looks like things are set to continue or perhaps go even further down hill. Another factor at the moment is Nelson Mandela's health, I wonder if the inevitable eventually happens what impact that may have on the Rand?The Dollar gains (US) are partly attributable to better than expected labour market data in the US if I heard correctly! Quote Link to comment Share on other sites More sharing options...
Sunnyskies Posted June 11, 2013 Report Share Posted June 11, 2013 I'm not an economist but here are some factors that I an aware of:- at GFC mark 1 (ie 2008 - 2009) the Aussie banks were not exposed to the subprime debacle, and so were relatively immune to what was happening in Europe. This made Aussie banks a relatively safe haven and there was an inflow of capital into Aus. - the Aus govt is perceived as stable (surprising to those who watch the Punch and Judy show here but not to those in other countries were our politicking is a first world problem), although the carbon price debacle here has undermined the renewable sector significantly (to the extent that a lot of renewable companies are not doing new developments in Aus and a change of govt is unlikely to help this particular problem). Again this encouraged foreign investors to invest in Aus.- China didn't slow down when Europe did. The continued demand from China fuelled the mining boom, which fuelled high share prices in resource companies, which fuelled inflow of funds into Aus.- US treasury bonds were no longer flavour of the month, and looking for a safe haven investors continued to invest in Aus.When a country has a strong inflow of capital it increases demand for the local currency which then increases in value.Aussie bankers and most people that I encountered in that sector regarded the high Aussie dollar as a bit of an aberration. Most of them grew up with the Aussie being much weaker than the US dollar and believe that it should be at the 75 to 85 cent mark not parity. Why is the Aussie decreasing:- the China demand slowed dramatically which has had the knock on effect of reducing the share prices of the mining companies - causing capital outflow- the US has been stimulating its manuf sector significantly, which is increasing the job data, which is increasing share prices in the US which is making US bonds more attractive again - which diverts investment from Australia- Australia's manufacturing sector is in a bit of a mess and can't really compete globally due to high wages - so no quick fix like the US. Interestingly one factor causing the US to increase manufacturing is the fear of intellectual property theft from China and the fact that the wages in China have increased dramatically, making Chinese manufacturing costs equal to the cost of manuf in the US. Add to that the cost of shipping products to the US and suddenly te US is cheaper. Only impact on Aus is that our messy manuf sector has exacerbated the two speed economy of Australia and without having a strong manuf sector the impact of the slowing mining sector is felt more strongly. - as the Aussie is not a traditional safe haven the opportunistic investors who moved into a strong Aussie will leave again.The benefit of a weaker Aussie is that imports are no longer cheaper than local, which may stimulate the local markets, but the fundamental issue of manuf hasn't been addressed. 2 Quote Link to comment Share on other sites More sharing options...
AndreaL Posted June 12, 2013 Report Share Posted June 12, 2013 Thanks Sunnyskies, the part about why the Australian dollar is decreasing fits perfectly with what is happening at the moment Quote Link to comment Share on other sites More sharing options...
Kappie Posted June 12, 2013 Author Report Share Posted June 12, 2013 Wow, thanks guys, now I have a clearer picture of what is going on. Do we have any idea what the plans are for the Aussie manufacturing industry? Quote Link to comment Share on other sites More sharing options...
Fish Posted June 12, 2013 Report Share Posted June 12, 2013 Wow, thanks guys, now I have a clearer picture of what is going on. Do we have any idea what the plans are for the Aussie manufacturing industry?We plan to rule the world...well, after smoko anyway 2 Quote Link to comment Share on other sites More sharing options...
AndreaL Posted June 12, 2013 Report Share Posted June 12, 2013 We plan to rule the world...well, after smoko anyway You can't rush into these things......we've got to wait for Damo to come back from the dunny.....he's the ideas man 1 Quote Link to comment Share on other sites More sharing options...
Donovan83 Posted June 13, 2013 Report Share Posted June 13, 2013 Haha... I love how even at safety update meetings at one of the big 2 mines here in WA, the breaks in the morning and after lunch are referred to as "smoko".As in - "A worker was on smoko when he fell down a well."lol Quote Link to comment Share on other sites More sharing options...
AndreaL Posted June 13, 2013 Report Share Posted June 13, 2013 Yep, I attended a strategic planning meeting the other day and the first question was, " When are the smoko's?".....even people who don't smoke have smoko. Quote Link to comment Share on other sites More sharing options...
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