Day Trading & Forex Forum

Tiger21Invest

The underlying sentiment is for risky assets. With rates higher in Australia, investors are already interested in a carry trade with Aussie dollars, but with the nation’s four largest banks posting combined after tax profits of A$8.6 billion in the latest half year, there are additional fundamentals supporting the thesis. Australian banks are stronger than most areas really underpinning the desire for risk in their currency. Long Aussie.

Tiger21Invest

I think the Australian government will be one of the first to increase interest rates supporting additional strength in the Aussie dollar. Budget figures are coming in better than expected as tax receipts are improved and traders are now even expecting a 50bps increase in rates by December. Adding fuel to this, central bank Governor Glen Stevens said yesterday that, “Australian interest rates will have to move off their current usually low levels.”

Tiger21Invest

The Aussie dollar was up against all 16 major currencies as retail sales climbed 0.9% in August after having dropped by the same amount in July, beating estimates of 0.5%. I consider this to be a very strong result and shows the continued strength in Australia. It touched a 13-month high of .8819 during intraday trading and I expect continued strength.

Tiger21Invest

Aussie dollar gained 9% vs. the USD this quarter. With the solid fundamentals now being reported in Australia, it makes sense for the Reserve bank to start withdrawing its easing policies. The growth picture is quite positive and investors expect the overnight cash rate to be raised by 25bps sooner rather than later. Governor Stevens stated this week, “interest rates can be expected, at some point, to move off their current unusually low levels.” Long the Aussie dollar.

Tiger21Invest

Australia unexpectedly raised interest rates, the first G20 nation to do so since the recession began, demonstrating its faith that the Australian economy has successfully turned the corner. The Aussie dollar rallied against all 16 of the most traded currencies. Continue to buy Aussie dollars.

Tiger21Invest

With inflation contained in Australia at 1.5%, well below the 2-3% target, it appears a little odd that the Australian bank decided to increase interest rates so soon, but apparently the 8% increase in home prices this year was cause for concern. I would continue to be long the Aussie dollar on expectation for continued asset price increases and interest rate increases while the US will continue to maintain its interest rates at the current low levels.

Tiger21Invest

Australia reported an unexpected gain in unemployment furthering speculation that Australia’s central bank will continue to increase interest rates. The number of people employed rose by 40,600 last month from August 2008, as economists expected a decline of 10,000. The unemployment rate fell to 5.7% from 5.8%.

Tiger21Invest

Australia has maintained its economy through strong trade with China as it exports commodities such as iron ore and coal to fuel China’s demand that it has generated through its stimulus package. But it could be dangerous for Australia to depend too much on China as a large part of the demand was in restocking inventories. Now Australia is trying to decide when it should take away its stimulus and how quickly it will tighten monetary policy, but I am also monitoring growth and trade with China as an important factor for future economic stability and growth in Australia.