Get Fully Briefed with Yahoo Finance, delivered straight to your inbox.
Amid current global financial market turmoil as central bankers flounder to implement policies to tackle the once-in-forty-year inflation problem, the Aussie dollar (AUD) has been crunched.
Or has it?
At one stage this week, it fell below 64 US cents as global investors struggled to work out the best place to park their funds amid policy ructions around the world. Talk of a pending global recession and a drop in some key commodity prices had a big impact on the AUD.
The fall in the Aussie dollar was, however, somewhat complicated by the fact that virtually all other currencies were also smashed lower against a booming US dollar.
Also by the Kouk:
Get set for a tough budget in October
RBA’s rate forecast error a blessing in disguise
Booming economy means interest rates have to keep climbing
The media attention to the US 64 cents was a distraction from the fact that the AUD is actually strong against most other major currencies – the Euro, British pound, Japanese yen, Canadian dollar and New Zealand dollar.
On a trade weighted basis, which measures the AUD against a basket of global currencies, it is broadly flat trading around the levels at the start of 2022 and even in the period immediately before the arrival of COVID.
This resilience means that fears of a currency problem for the Reserve Bank are low-key.
Indeed, the AUD’s broader stability is a source of comfort rather than concern for policymakers even though against the USD it is markedly weaker.
It remains unlikely that there will be any material impact on inflation from the moves of the Australian dollar, even though many commodities and imported items are priced in US dollars.
European exporters, for example, still convert their revenue to Euros. And against the Euro, the AUD is tracking strongly.
The price of a car made in Europe, for example, might actually be cheaper in Australia in the months ahead because of the relative strength of the AUD versus the Euro.
It remains a challenge to judge how the AUD will trend in the remainder of 2022 and into 2023.
It is increasingly likely that the Australian economy will outperform many other countries which is often a magnet for global investment funds.
At the same time, the Federal budget next month is likely to confirm a genuine and substantial move to repair the budget, a fact that should support Australia’s AAA credit rating and with that investor support.
The interest rate differential between Australia and the world is likely to work against the AUD.
The RBA appears to be setting the scene for a moderation in the monetary tightening cycle, just when the likes of the US Federal Reserve, the Bank of England and even the European Central Bank are hiking in big steps.
When there is huge economic uncertainty, as there now is, many financial market prices overshoot their true value. When this happens, investors are reluctant to be the first to fight these trends, for fear of being steam-rolled by the market momentum.
It could be said that the current spike in the USD, the surge in bond yields and the fall in stock markets are all an overreaction to the fundamentals.
If so, the turn could be soon, although many investors have lost good money trying to trade the turning point.
But over the more medium term, say the next 3 to 6 months, when the dust settles for the inflation fears and central banks sit back and move to ‘on hold’ decisions for monetary policy, the USD is likely to reverse and with that, the AUD should rebound against it.
A move back into the US$ 70 cent region.
In terms of how it goes against the other major currencies, some weakness against the Euro would seem most likely in these circumstances.
Follow Yahoo Finance on Facebook, LinkedIn, Instagram and Twitter, and subscribe to the free Fully Briefed daily newsletter.
The effigy of Queen Elizabeth II may not remain on our $5 note, with discussions happening around whether to change the currency. Here’s what we know so far.
The most common passwords in Australia have been revealed. Here are the passwords to avoid.
The dollar rose against the euro on Friday but pared gains late in a session that was muddied by quarter-end trading while riskier commodity-led currencies fell sharply after European inflation hit a record high and U.S. consumer spending increased faster than expected. But while the dollar index was showing its biggest quarterly gain since the first quarter 2015 it was set for its first weekly decline in three weeks. After hitting a record low on Monday, the British currency was on track for a weekly gain after the Bank of England bought British government bonds, known as gilts, on Wednesday, Thursday and Friday.
Canada's main stock index ended flat in volatile trading on the last day of a quarter that has been plagued with worries around economic growth and hawkish central bank policy actions. The Toronto Stock Exchange's S&P/TSX composite index provisionally ended up 2.38 points, or 0.01%, at 18,444.22, after climbing to the day's high of 18,685.04. "It does look like pretty much the whole market is braced for recession," said Elvis Picardo, portfolio manager at Luft Financial, iA Private Wealth.
The U.S. dollar resumed its seemingly relentless march higher in early European trading Thursday, while sterling slumped as the relief rally attached to the Bank of England’s intervention into the bond market dissipated. The Bank of England announced an emergency bond-buying on Wednesday, attempting to shore up the gilt market which had slumped, along with the pound, after the new U.K. government announced substantial tax cuts, likely funding by hefty borrowing.
Aussies are being warned to look out for increased scams following the recent Optus data breach. Here are four to watch out for.
It’s back to the future with this ‘remarkable’ Queensland home that also includes a Japanese garden. Take a look inside.
(Bloomberg) — The Ontario Teachers’ Pension Plan is looking to potentially double staff in its Singapore office as the C$243 billion ($177 billion) Canadian fund steps up its expansion in Asia.Most Read from BloombergMacKenzie Scott Files for Divorce From Science Teacher HusbandMeta to Cut Headcount for First Time, Slash Budgets Across TeamsTop Apple Executive Is Leaving After Making Crude Remarks in TikTok VideoStocks Plummet to 22-Month Low as Fed Hawks Circle: Markets WrapMarjorie Taylor Gre
A new report has outlined the devastating reality facing many Centrelink recipients as the cost of living soars. This is what you need to know.
Investigator who interviewed Dahmer in prison convinced that he was responsible for 1981 murder of Adam Walsh in case that shocked America
There are more unemployed people than job vacancies as the job boom continues. Here’s which industries are feeling the pinch.
Australia will not put curbs on gas exports after reaching a deal with its three east coast producers of liquefied natural gas (LNG) to avert a forecast supply crunch, Resources Minister Madeleine King said on Thursday. The government threatened the export curbs in August, worrying Asian buyers and LNG investors, following a warning by the competition watchdog that the east coast market faced a shortfall of 57 petajoules of gas in 2023. The pact unveiled on Thursday provides for Queensland Curtis LNG, run by Shell, Australia Pacific LNG, run by ConocoPhillips , and Gladstone LNG, run by Santos, to offer an extra 157 petajoules of gas to the domestic market next year.
Australian authorities said on Friday they have commenced an operation to protect the personal information of 10,000 people whose data may have been shared online after a cyber attack on Optus, the country's second-largest telco. The efforts come three days after an unidentified person posted online that they had released personal details of 10,000 Optus customers and would keep doing so daily until they received $1 million. The Australian Federal Police (AFP) assistant commissioner for cyber command Justine Gough said the agency was working to identify and protect the same number of people whose "details have been unlawfully released".
(Bloomberg) — Most Read from BloombergMacKenzie Scott Files for Divorce From Science Teacher HusbandMeta to Cut Headcount for First Time, Slash Budgets Across TeamsTop Apple Executive Is Leaving After Making Crude Remarks in TikTok VideoStocks Plummet to 22-Month Low as Fed Hawks Circle: Markets WrapMarjorie Taylor Greene’s Husband Files for Divorce After 27 YearsAmerican companies have had a growing list of reasons to downgrade their ties with China in recent years. Former President Donald Tru
Experts are predicting the Reserve Bank will hike the official cash rate by another 0.5 per cent on Tuesday. This is what it will cost you if it does.
The local market is expected to slip this morning after another sell-off on Wall Street overnight. This is your Friday morning wrap.
Interest rates are rising, rents are going up and the cost of living is the highest it’s been since the 1990’s. So, if you don’t already have a budget in place it might be time to put one together. Making a budget can be tedious, or even overwhelming but it can really help you feel more on top of your finances and hopefully save some money too.
Australia's housing affordability problem is getting worse, despite the recent fall in property prices. Now, the Productivity Commission has put forward a drastic new plan.
The competition watchdog has formed the preliminary view Telstra and TPG's spectrum-sharing agreement would improve regional coverage but it isn't ready to approve the deal.The Australian Competition and Consumer Commission said on Friday TPG and Telstra had agreed to give it a second extension to decide on the $1.
Making money and managing money don't necessarily go hand in hand when it comes to celebrities. Read on for our list of the most successful celebrity investors.