Australian Dollar Is Doing Opposite Of US Dollar

Australian Dollar Is Doing Opposite Of US Dollar

G7 leaders along with central bankers consented to short the Yen in order to avoid price appreciation. The idea is to assist the Japanese by continuing to keep the Yen as low-priced as is possible making sure that their own exports enjoy a competitive cost advantage on the world markets.

What we tend not to hear about is where that money acquired through short selling the Yen is going. It appears to be going into the Australian dollar. Additionally it is going into Australian banks where the yearly yield is above 5%. The government is increasing rates as a way to cool off their own red hot economy and fight inflation. This means that interest rates are generally high when compared with a lot of countries around the globe.

The method of shorting the Yen and then taking the money and putting it to work in other countries is termed the Carry Trade. For many years the Japanese Carry Trade helped power expansion around the world. In 2007 the Carry Trade began to wind down as the Yen rose in value forcing margin calls and plenty of short sellers to buy to cover their positions. Since the Yen continued to go up, the Carry Trade eventually reached an end.

Today, the Carry Trade definitely seems to be growing yet again because of the destructive earthquake which struck Japan in March of 2011.

Not only is the Aussie dollar appreciating in price opposed to the majority of currencies, you'll find it is doing almost a complete inverse of what the US dollar (USD) is. This shows that investors are shorting the US dollar and buying the Australian dollar.

The Australian dollar (AUD) is no longer considered as a unsafe asset. Australia is known for a expanding economy with stringent budgetary discipline. The country has a powerful mining sector that's creating significant profits because of soaring commodity prices. In fact, the mining icon BHP Billiton (BHP) has just announced a $13 billion purchase to grow their coal and also iron ore operations inside Australia, further spurring confidence about the nation's mining sector. This uptrend in the AUD is additionally being helped by the fact that customary safe-haven resources like gold remain expensive.

A number of Australian's are worried regarding the housing sector. In Australia, the cost of houses has doubled over the last Decade. The great thing though is that as the government boosts rates of interest, home sales are falling quickly. This didn't take place in the US since greedy companies started fraudulently qualifying folks for financial loans so as to counter the slowing housing industry. It turned out to be quite profitable to qualify anyone for a loan, and then bundle that loan up in a basket with other mortgages and sell that basket to somebody else. Provided that Australia's laws and regulations remains strong and firms are tested for compliance with exactly who they qualify for a loan, the housing sector should slowly cool off while rates of interest go up.

When you look at the stock chart on AUD you will discover that it's been on a massive upward move, jumping to fresh all-time highs against the US dollar. In fact, the AUD has climbed contrary to the United States Dollar for 9 out of the previous 11 months, making an increase of in excess of 24% since June of 2010.

Speculators hoping to play the downtrend of the US dollar for profits might want to contemplate going long the AUD in place of shorting the USD. An Australian Dollar ETF exists called the CurrencyShares Australian Dollar Trust (FXA). I do not have a position in this ETF at the time of writing this article.

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