Dollar may hit 50 US cents; imports sink
February 18, 2009
The Australian dollar may sink to as low as 50 US cents even as import demand shrivels, led by a slump in machinery shipments.
Data out today showed merchandise imports sank by 14% in January, or $2.86 billion, from the previous month to $17.261 billion. That compared to a downwardly revised $20.121 billion in December, the Australian Bureau of Statistics
.
Imports of mineral fuels, lubricants and related materials fell to $2.057 billion in January from $2.289 billion a month earlier, while imports of machinery and transport equipment fell to $6.122 billion, from $7.448 billion.
Merchandise imports into Australia for January, in seasonally adjusted terms, were not available on Wednesday, and will be released on February 24, the ABS said.
Global trade has hit a wall as the world economy sinks into recession. China reported its imports fell more than 40% in its most recent monthly report, while other countries are also posting big declines.
The economic slump will particularly hit Australia's currency sending it as low as 50 US cents, as commodity prices fall and the Reserve Bank may lower borrowing costs to a record, TD Securities said.
Australia's dollar this morning fell to 63.34 cents, the weakest since February 3. The currency touched 47.75 cents in April 2001, the lowest since it began trading freely in 1983.
''The global economic collapse, the weakness of commodity prices, the prospect of Australian interest rates going to 2% or less and a severe domestic recession suggest the Australian dollar could weaken sharply,'' wrote Stephen Koukoulas, London-based head of global foreign exchange and fixed-income strategy at TD Securities, in a note to clients.
The Reserve Bank of Australia cut interest rates to a 45-year low of 3.25% on February 3 after the $1 trillion economy grew at the slowest pace in eight years in the last quarter of 2008. Traders are betting benchmark rates will fall to 2.26% over the next 12 months, according to a Credit Suisse Group AG index based on swaps trading.
''Right now, it could be argued that Australian dollar drivers present a bigger list of negatives and the depth of the problems are more severe'' than in 2001, Koukoulas wrote.
The currency may soon drop below October's five-year low of 60.1 US cents and after that a decline to 50 US cents or less is possible, he said.
The Australian dollar fell 35% since reaching a 25-year high of 98.49 US cents on July 16 as prices dropped for commodities that account for 60% of the country's exports. That's the biggest decline among the 16 most-traded currencies against the US dollar.
Australia's economy will expand 0.25% in the year to June, the central bank said February 6.
AAP, Bloomberg News
Showing posts with label aussie dollar. Show all posts
Showing posts with label aussie dollar. Show all posts
23 February 2009
7 October 2008
Australian Bond Risk Rises to Record
Australian Bond Risk Rises to Record as Credit Crisis Spreads
By Oliver Biggadike
Oct. 7 (Bloomberg) -- The cost of protecting investors from Australian corporate bond defaults increased to a record on concern the U.S. government's bank rescue package won't do enough to unlock global money markets as the credit crisis spreads.
European governments are rushing to shore up their banks after the leaders of the four biggest European Union economies were unable to agree on a joint effort at a weekend meeting. BNP Paribas SA agreed to buy Fortis's units in Belgium and Luxembourg for 14.5 billion euros ($19.6 billion) after a government rescue failed. Denmark and Germany promised to guarantee all their countries' bank deposits.
``Credit markets remain extremely weak and fragile around the globe, with the developments in Europe the major contributor for the recent weakness,'' Gus Medeiros, a credit analyst at Deutsche Bank AG in Sydney, wrote in a research note today. ``We expect the market to remain very volatile and thin in the next few days.''
The Markit iTraxx Australia index rose 34 basis points to 245 at 8:39 a.m. in Sydney, according to prices from Citigroup Inc. The price of the contracts, tied to the debt of 25 companies including Qantas Airways Ltd. and BHP Billiton Ltd., is the highest since the iTraxx benchmarks started in 2004. Sydney trading desks were closed yesterday for a holiday.
The Markit iTraxx Japan index rose 9 basis points to 207 at 8:56 a.m. in Tokyo, Morgan Stanley prices show.
U.S. credit-default swaps rose yesterday in New York, with the Markit CDX North America Investment Grade Index climbing 10 basis points to 176, according to broker Phoenix Partners Group. Contracts on Goldman Sachs Group Inc. climbed 58.5 basis points to 460.5, according to CMA Datavision prices.
The indexes are benchmarks for protecting bonds against default and traders use them to speculate on changes in credit quality. A basis point, or 0.01 percentage point, is worth $1,000 on a swap that protects $10 million of debt from default.
Credit-default swaps pay the buyer face value in exchange for the underlying securities or cash equivalent if a borrower fails to adhere to its debt agreements.
To contact the reporters on this story: Oliver Biggadike in Tokyo at obiggadike@bloomberg.net.
By Oliver Biggadike
Oct. 7 (Bloomberg) -- The cost of protecting investors from Australian corporate bond defaults increased to a record on concern the U.S. government's bank rescue package won't do enough to unlock global money markets as the credit crisis spreads.
European governments are rushing to shore up their banks after the leaders of the four biggest European Union economies were unable to agree on a joint effort at a weekend meeting. BNP Paribas SA agreed to buy Fortis's units in Belgium and Luxembourg for 14.5 billion euros ($19.6 billion) after a government rescue failed. Denmark and Germany promised to guarantee all their countries' bank deposits.
``Credit markets remain extremely weak and fragile around the globe, with the developments in Europe the major contributor for the recent weakness,'' Gus Medeiros, a credit analyst at Deutsche Bank AG in Sydney, wrote in a research note today. ``We expect the market to remain very volatile and thin in the next few days.''
The Markit iTraxx Australia index rose 34 basis points to 245 at 8:39 a.m. in Sydney, according to prices from Citigroup Inc. The price of the contracts, tied to the debt of 25 companies including Qantas Airways Ltd. and BHP Billiton Ltd., is the highest since the iTraxx benchmarks started in 2004. Sydney trading desks were closed yesterday for a holiday.
The Markit iTraxx Japan index rose 9 basis points to 207 at 8:56 a.m. in Tokyo, Morgan Stanley prices show.
U.S. credit-default swaps rose yesterday in New York, with the Markit CDX North America Investment Grade Index climbing 10 basis points to 176, according to broker Phoenix Partners Group. Contracts on Goldman Sachs Group Inc. climbed 58.5 basis points to 460.5, according to CMA Datavision prices.
The indexes are benchmarks for protecting bonds against default and traders use them to speculate on changes in credit quality. A basis point, or 0.01 percentage point, is worth $1,000 on a swap that protects $10 million of debt from default.
Credit-default swaps pay the buyer face value in exchange for the underlying securities or cash equivalent if a borrower fails to adhere to its debt agreements.
To contact the reporters on this story: Oliver Biggadike in Tokyo at obiggadike@bloomberg.net.
31 July 2008
Why the aussie dollar will fall
It is now clear that the Antipodes are tipping into a serious downturn. Australia's NAB business confidence index fell to its lowest level in seventeen years in June. New Zealand's central bank began to cut interest rates last week on fears that the economy may have contracted in the second quarter, and is now entering recession. Housing starts slumped 20pc in June to the lowest since 1986.
Gabriel Stein, from Lombard Street Research, said Australia could prove vulnerable once the global commodity cycle turns down. It has racked up a current account deficit of 6.2pc of GDP despite enjoying a coal, wheat, and metals boom, effectively spending its resources bonanza in advance. Household debt has reached 177pc of GDP, almost a world record.
"It is amazing that in the midst of the biggest commodity boom ever seen they have still been unable to get a current account surplus. They have been living beyond their means for 10 years. What worries me is that productivity growth has been very low: they have coasting after their reforms in the 1990s," he said.
*snip*
"The easy money went straight into real estate," said Hans Redeker, currency chief at BNP Paribas.
"Australia will now have to generate 4pc of GDP to meet payments to foreign holders of its assets," he said. This is twice as high as the burden faced by the US.
Gabriel Stein, from Lombard Street Research, said Australia could prove vulnerable once the global commodity cycle turns down. It has racked up a current account deficit of 6.2pc of GDP despite enjoying a coal, wheat, and metals boom, effectively spending its resources bonanza in advance. Household debt has reached 177pc of GDP, almost a world record.
"It is amazing that in the midst of the biggest commodity boom ever seen they have still been unable to get a current account surplus. They have been living beyond their means for 10 years. What worries me is that productivity growth has been very low: they have coasting after their reforms in the 1990s," he said.
*snip*
"The easy money went straight into real estate," said Hans Redeker, currency chief at BNP Paribas.
"Australia will now have to generate 4pc of GDP to meet payments to foreign holders of its assets," he said. This is twice as high as the burden faced by the US.
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