What's your prediction on the Australian Dollar?

[SuePa]

Having just completed my 7 week stint in Central Europe, I can confidently predict it will soar!

 

[drron]

Having just completed my 7 week stint in Central Europe, I can confidently predict it will soar!

With me it was the reverse. Before we would leave for the US the Aussie would plummet. It was one of Keating's major mistakes. He devalued the Aussie just a few days before we came home. We had already been away for 4 weeks.

 

[drcam]

Considering that I am going to Japan and the US in Sep-Oct, the AUD will plunge.

It has never failed to plunge before I go on any trip

 

[drron]

Considering that I am going to Japan and the US in Sep-Oct, the AUD will plunge.

It has never failed to plunge before I go on any trip

We are off in September to japan as well. The little Aussie battler doesn't stand a chance.

 

[I love to travel]

We are off in September to japan as well. The little Aussie battler doesn't stand a chance.

And to seal the deal US and Europe in August and September for me.

 

[SydneySwan]

My experience with the yen seems to be to the contrary. I too will be in Japan in September (AFF meetup anybody?) and since I ordered my JR pass and prepaid my hotels the Aussie battler has beaten the yen into submission from 91 down to 97! I expect it will be over 100 by the time I land.

 

[RAM]

Yep. Australia used to be the Lucky Country - but over the last 10-15 years we have become the Stupid Country - for doing things like sending all our gas offshore and being forced to pay ridiculous prices for our own gas.

Showing your age there!

More like 'over the last 25 to 30 years' unfortunately since the last really rational moves of any sort were made at a Federal level. Mind you, going back a little further, one fund manager spent a few hundred thousand of his own money trying to stop Howard approving the gifting of LNG to Japan & Korea. Didn't work though.

Seems the AUD is destined for terminal long term decline after the 'Chinese economic miracle' goes the way of the 'Japanese Century'. The goings on with Russia in Ukraine may well speed up the demise of 'China's economic miracle'.

In the short term - the AUD USD rate will continue to be driven by the latest guesses on monetary policy with the Chinese slowdown wildcard thrown in occasionally.
_____________________________________

One positive from Covid - all major countries debased their currencies so no one country ended up paying the price for a few years. Then the chickens came home to roost and transitory inflation isn't so transitory.

Consider this proposition: no Central Bank has successfully brought inflation under control for an extended period. In reality they have only had a temporary impact. The real drivers of falling inflation that began in the 80s came from various free-trade or the opening up of dictatorships. Think NAFTA, the fall of the Berlin Wall, the opening up of China, Vietnam etc. All of a sudden there was competion for both the production of goods & services along with around 1.5 billion (then) very low cost workers. Now there are virtually no countries left to source billions of low cost workers from.

An example from NAFTA. The Kellogg's CEO boasted in an earnings call about how he'd cut costs and locked them in for three years. Once NAFTA was nearing signing, it coincided with the wages deal with the union covering Kelloggs (US) ending. The union, totally unreasonably, asked for COLA only (cost of living adjustment). Kellogg's profits had been growing nicely. The CEO, with Board approval, said no. Instead his response was that they were going to shut down three production lines within their US plants and offer a zero increase for the next three years. Further that these lines would be fully dismantled and moved to Mexico into new facilities, so workers were asked to vote by each local (site union location) on whether they would accept the offer or not. Then the decision would be made on which plants to shut.

The vote was held and not one location voted against accepting a wage freeze for three years (while the US inflation rate was around 3 to 4% PA IIRC). The CEO, almost laughing during this earnings call then added that 'we still shut down three lines as a warning'.

Slightly more recently, another boastful call, the then CEO proudly announced that their initiative on margin expansion had been trialled and was more successful than they'd hoped and would be rolled out across their entire product range.

The initiative? Kelloggs had reduced the weight in 5 different cereal types for 1 package size each by 3 to 5% AND, the value-add for customers, increased the air pressure within the bag by 2 to 3 PSI. The feedback was that sales had risen for those package sizes relative to the other size(s) with the range as 'customer incorrectly think the extra firmness meant they were getting greater contents'. So much for the printed message 'Contents may have settled during shipping'.

This was the first instance I came across of wilful shrinkflation.

A close to home example, Vegemite. Used to come in 1 & 2 lb jars (as well as 1 or 2 smaller sizes) which then became 908 gram and 454 gram jars. Today the two largest sizes have shrunk to 560 gram and 380 gram.

Or much more recently the margin expansion by Coles/WW/Aldi on their own brand products.

For example, home brand white sliced bread was $0.95 cents/loaf before Russia's invasion of Ukraine, soon after the price went to $1.25, $1.50 ... $2.40 (shocking found on search just now). Early on when asked, Coles Mgmt responded it was due to soaring wheat prices.

However, wheat prices fell after a few months in 2022 and in 2023 are now below the pre-war levels in 2021. Funny that. WW & Aldi have been coincidentally increasing their prices similarly.

The giveaway to this margin expansion is seen at Aldi where the price differential between the white sliced and raisin toast loaves used to be around $1.50 and is now 10 cents. Seems that the wheat used for raisin toast is much cheaper...
_______________________________

BTW - house prices feed into the CPI through the adjusted rent calculation which got changed to a three year moving average (just before a Federal election was due to be announced, just coincidentally saw the CPI release a couple of weeks before the election - much lower than it would have been. Superior economic management of course).

So I'm not optmistic on the AUD vs anything but the NZD & Yuan.

 

[AirportRail]

I think the next little period isn't looking great for the AUD.

It looks like the RBA is finished hiking and we've hit the terminal interest rate (4.10%) while rates in the US are higher and UK (5.25% and 5.5% respectively).

Also, the Chinese economy is weakening which so likely less demand for our commodities and currency.

Some suggestion that the AUD could drop to as low as 0.40 USD. Link:
Aussie dollar could dive to 40 US cents: What happens to ASX shares?

Why your overseas holiday seems more expensive than ever (AFR) Aug 9th 2023​

Why your overseas holiday seems more expensive than ever

 

[Pushka]

I think the next little period isn't looking great for the AUD.

It looks like the RBA is finished hiking and we've hit the terminal interest rate (4.10%) while rates in the US are higher and UK (5.25% and 5.5% respectively).

Also, the Chinese economy is weakening which so likely less demand for our commodities and currency.

Some suggestion that the AUD could drop to as low as 0.40 USD. Link:
Aussie dollar could dive to 40 US cents: What happens to ASX shares?

Why your overseas holiday seems more expensive than ever (AFR) Aug 9th 2023​

Why your overseas holiday seems more expensive than ever

Have to hope our Super Funds are across all this. Also BHP dividend cut by 40% this week. Gulp.

 

[rock86]

If China don't stimulate, the AUD is cactus.

However, while a weak China certainly impacts Australian exports, a weak China will impact Global growth and the US will eventually feel it - still not convinced the US doesn't go into recession.

AUD cactus though IMO in the short-term, interesting times though in the mid-long term.

 

[Saab34]

Will hold off booking a Hawaii trip. 40c will blow the budget well and truly. Fiji or Rara will do.

 

[I love to travel]

Will hold off booking a Hawaii trip. 40c will blow the budget well and truly. Fiji or Rara will do.

Yep I am rethinking US trip next year too. Have reward flights in place but just leaving them as is for now and not booking hotels etc.

 

[jakeseven7]

55 cents by Christmas

 

[SYD]

Some suggestion that the AUD could drop to as low as 0.40 USD. Link:
Aussie dollar could dive to 40 US cents: What happens to ASX shares?

That’s a fairly extreme outlier prediction. We didn’t get that low in the miserable 2001 period.

I‘m heading off to the US and CA next week. A tad worse than Mar / Apr this year when I was last there….

 

[cove]

Just had to buy a bit today at 64.14 which was an ouch moment.

 

[Pushka]

Im rejigging Christmas bookings currently. In some places prices are higher because of now reduced availability. Might prepay some as well.

 

[dajop]

The other way of dealing with future travel if you don't want to pre-purchase travel arrangements, have the cash (and are a gambler) is to open a Wise account and buy some USD now to use in future travels.

 

[cove]

We are running with 0.67 currency in our US account which we thought was a bit ordinary but looks ok at the moment.

 

[Steady]

The other way of dealing with future travel if you don't want to pre-purchase travel arrangements, have the cash (and are a gambler) is to open a Wise account and buy some USD now to use in future travels.

I assume the same would apply to other currencies with a Wise account - I’m thinking of hedging some of my upcoming European travel

 

[SydneySwan]

Folks are over-analysing this. I have a simple rule of thumb that if I go overseas the AUD will decline against the overseas currency during the period when I am there and then rebound once I have left. I am currently in the UK and it has declined from about .53 to .50 so far. I leave on Sep 4 so I am sure it will rebound then. After the UK I then have 10 days in Japan so expect a period of unexpected Yen strength until I depart.