Australian Dollar - Possible Bad News

[BrettGC]

Well guys, some bad news for my fellow Aussies and I;  I have it on very good authority that the Aust Reserve Bank may be devaluing the Australian dollar by 15% over the weekend to help encourage foreign investment and lower the cost of our exports.  This despite the 0.25% reduction in the official rate this week and the subsequent 2-3c drop against the USD.  For those of us either living, or planning to live overseas with Australian based income it's a pretty big hit.  It may be an exercise in futility given the strength of the Australian economy at the moment and the AUD may actually rise of it's own accord again anyway unless they do something to maintain it i.e. the Swiss example.  I have a friend that works in Treasury and the buzz is pretty strong there. 

 

I guess it's just wait and see.

[Genius]

Do not worry UK devalued 50% against the peso from the peak a few years back. The Japanese are opening the flood gates for a devaluation to regain a competitive advantage, so 15% is not so bad. I can see the Japanese devaluation really creating a tumble of me too reactions in Asia to regain advantage and the Peso might well follow suit in due course.

[Adventurer]

I prefer to see the aussie dollar fall back to like it was several years ago since I make most of my income online from the USA. I also get affected though when I convert my money in the Philippines but it just gives me more reason to work harder and spend less :)

[earthdome]

With all these nations devaluing their currency it sounds like a race to the bottom.

[JJReyes]

Gold prices plunged after the large speculators dumped it. Watch it rise over the next 12 months as nations devalue their currency. Devaluation is so simple to do and so tempting. Just print more money. Since most governments are in debt, you are repaying the lenders less.

[OnMyWay]

Well guys, some bad news for my fellow Aussies and I;  I have it on very good authority that the Aust Reserve Bank may be devaluing the Australian dollar by 15% over the weekend to help encourage foreign investment and lower the cost of our exports.  This despite the 0.25% reduction in the official rate this week and the subsequent 2-3c drop against the USD.  For those of us either living, or planning to live overseas with Australian based income it's a pretty big hit.  It may be an exercise in futility given the strength of the Australian economy at the moment and the AUD may actually rise of it's own accord again anyway unless they do something to maintain it i.e. the Swiss example.  I have a friend that works in Treasury and the buzz is pretty strong there. 

 

I guess it's just wait and see.

 

I'm not sure what technique they would use to devalue the AUD by that much instantly, but it is highly unlikely that they would do it.  That would be viewed as direct manipulation by other countries and they could get a severe backlash that could hurt trade more than help it.  Almost all countries engage in currency manipulation, but it is done in more subtle ways, such as the interest rate cut:

 

http://finance.yahoo.com/news/bank-cuts-rate-australian-dollar-100000279.html

 

I suspect they will try to drive down the AUD through these types of techniques, which they also hope will have other beneficial side effects.  If they do a direct intervention, that will be an interesting story!!

 

People can make millions off the fluctuations, so release of confidential information is of course frowned upon.  Look what Soros did on Monday:

 

http://www.smh.com.au/business/markets/billion-dollar-bet-on-rate-cut-pays-off-20130507-2j5j5.html

 

Guys like him can move the currency just by placing a bet!  He has done this several time in other countries, with the most memorable the big one in the UK.

 

If anyone has some play money, it would probably be a good bet to buy some longer term put options on the AUD.  Seems like the gov is ready to push it down over the next year or two or three.

[ozepete]

Don't worry, while some downward pressures on the AUD may apply a 15% drop or anything like it simply will NOT happen, unfortunately. 

But Brett if you intend moving to live in the Phils in the future, you may do well to look at investing now in Philippine Stocks via the PSE. The PSE index over recent years has shown steady growth far better than most other investment opportunities.

Edited May 9, 2013 by ozepete

[JJReyes]

But Brett if you intend moving to live in the Phils in the future, you may do well to look at investing now in Philippine Stocks via the PSE. The PSE index over recent years has shown steady growth far better than most other investment opportunities.

 

My nephew, who is a stockbroker with the Philippine Stock Exchange, keeps reminding about it. He wants me to open an account. I like to remind him that 50% of the entire valuation of the stock market is owned and controlled by just 20 extended families. Talk about the potential for manipulation! Then again, the same thing happens in the United States and other markets.

 

Best stockmarket story I have ever heard is the Japanese gentleman who invented and patented the conveyor belt for the sushi plates that make them go around the restaurant. He sold the company and after taxes, parked $300 million in a Japan postal savings account paying virtually no interest. Since the post office is owned by the Japan government and the money is invested in government bonds also paying little interest, there is an implicit understanding that the funds are safe.

 

Every stockbroker in the nation invites him to lunch or dinner hoping to win his account. They explain that inflation is eating away at his money and he should invest all or part of it in the stock market. The gentleman is very polite, but the $300 million or what's left is still in the postal savings account. What the stockbrokers don't understand is the money cannot be consumed during his lifetime because his lifestyle is relatively modest. Besides, someone else is paying for all his lunches and dinners. 

[BrettGC]

Lots of food for thought, thanks guys.

 

Yes Ozepete, I'm making the move in August.

[OnMyWay]

If you are  interested in investing in Philippines stocks you can do it through some funds.  I was thinking about it a few months ago but never pulled the trigger, regretfully  Here is an article with info about an ETF.

 

http://finance.yahoo.com/news/another-rally-philippines-etf-ephe-223721320.html

 

I think Mathews has some funds with Philippines holdings and I like Mathews.

 

http://matthewsasia.com/portal.fs