Tuesday, November 10, 2009

Australian Dollar Forecast Nov 10

Our slightly more aggressive accounts have a 5% position in EWA (an Australian ETF). It acts as a hedge against the falling US Dollar and is generally a commodity play. The following news excerpt is useful information.

International Business Times Excerpt:

Australia: The Australian Dollar has opened another US Cent higher this morning, breaking through USD0.9200 after six consecutive positive sessions locally.The positive weekend sentiment on the AUD has been maintained and managed to outweigh the mixed data that was released yesterday on the Australian economy.

The overall impression is positive on the economy still. The labour market news saw the ANZ total job advertisements fall by 1.7% in October but the key take out is the annual sales are now improving.

These statistics are closely related with employment growth and there are pretty reliable signs the downturn in the official ABS official employment series may already be complete.

Housing demand surged in September with some of the strongest numbers seen.

So the scenario at the minute continues to be Australian Dollar news, more so than Greenback developments.

The US Dollar still seems soft, and until unemployment improves in the US, one thinks the A$ will continue its upward moves.

Commodity prices are key as always, with the Asian region's importance paramount to the Reserve Bank of Australia's views on the strength of the Australian economy.

LME Copper rose supported by a weaker US Currency, and reports the G20 would keep with current economic stimulus measures, potentially helping boost metal consumption, with further gains with lead, aluminium and nickel rising but zinc filled.

We see the AUD trading between 0.9250 and 0.9310 today and with a pretty bullish outlook.

Majors: The US Dollar had a mixed session after the G20 meeting increased speculation US interest rates will remain very low well into next year.

You have to ask yourself, why would the USD's steady decline stop? What would be the reason? It is becoming clear with recent FOPC and Fed Reserve statements that interest rates are on hold at record low levels until employment picks up in the US and if you're abetting person, mid 2010 seems a fair call.

So until then, the Greenback seems weak and will not heed the words of major OECD Finance Ministers complaining their currencies have appreciated too far and are placing too much pressure their export competitiveness.

These are bullish comments on our Australian position.

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