Posts Tagged ‘ AUD ’

Australia economy the worst is still to come

Western economy that has defied the financial crisis and kept growing . Australia economy was built on the emerging market bubble .

Assets which boomed off the back of aggressive emerging market growth will come under increased scrutiny with Australia particularly vulnerable.

That is the view of Alexander Friedman, CIO of UBS Wealth Management, who believes certain EM-linked markets are not properly reflecting the slowdown in the developing world.

He said:

‘While low valuations keep us neutral on EM equities, we reiterate our negative position on Australian equities and the Australian dollar, and are adding a new theme expressing a negative view on Australian financials, all of which are overvalued EM-linked assets.’

Emerging markets, Friedman said, are undergoing a two stage transition as foreign capital flows reverse direction.

‘If capital stops flowing, countries tend to go through two phases. First there’s a “crisis prevention” phase in which a country draws on any available liquidity reserves to prevent widespread bankruptcies.’
‘Then there’s a “reform” phase in which countries try to reduce their reliance on foreign capital,’ he said.

Reform phases

In the reform phase, Freidman said the key question is whether previous foreign inflows were channelled into profitable enterprise or speculative ones. One sign of the latter is foreign ownership of local assets.

On this count we are cautious on South Africa, where foreign bond holdings represent a massive 86% of the country’s reserves. This makes interest rates and the rand particularly vulnerable to a reversal,’

he said.

A second sign Freidman is wary of is misallocated capital, and among EM economies, he points out China’s investment-to-GDP ratio of 48% as ‘far too high’.

With producer prices in deflation for the past 18 months the economy is clearly suffering from overcapacity.’‘Imbalances have been able to persist and even grow as vast liquidity in the banking system created by the People’s Bank of China’s de facto dollar peg has fuelled credit growth to unprofitable enterprises, such as the steel industry,

Chinese transition

While Freidman notes the importance of reforms, and a key focus of China’s government, he remains realistic about the implications this transition will have on the world’s second-largest economy.

‘We expect the Chinese economy to continue to disappoint expectations over the course of the year, and believe recently announced measures to lower taxes for small businesses, support trade, and reform railway investment will directly affect the economy in only a limited way. We project growth to slow to 7.2% year over year in the fourth quarter.’

‘We continue to believe in the long-term emerging market consumption growth story but believe near-term performance will be challenging due to the headwinds to EM growth described above,’ Freidman said.

Aussie Falls to Lowest in More Than Two Years

Bloomberg reports Aussie Falls to Lowest in More Than Two Years as Home Loans Slow

Australia an ‘overvalued EM-linked asset’ says UBS WM’s CIO

Australia’s dollar fell to the lowest in more than two years versus the greenback after home-loan approvals grew at the slowest pace in three months, boosting the case for further cuts to borrowing costs.

The Aussie slid against all but one of its 16 most-traded peers amid speculation the U.S. central bank will reduce stimulus this year, narrowing Australia’s interest-rate advantage. Standard & Poor’s lifted the U.S. credit outlook to stable from negative, supporting the view that the Federal Reserve could taper asset purchases under its program of quantitative easing. New Zealand’s kiwi dollar fell.

“Housing is the one area most likely to make up for the mining investment downturn, and it’s disappointed,” said Joseph Capurso, a Sydney-based foreign-exchange strategist at Commonwealth Bank of Australia.

Australian Insolvencies Hit Record

Australian insolvencies hit record for month of April.

A new April record has been set for Australian companies becoming insolvent. Some 941 firms were put under administration, marking the highest tally for that month since records were first made public in 1999.

Some 941 firms were put under administration, according to an FTI Consulting analysis of Australian Securities and Investments Commission records.

Almost 3450 companies have gone into administration so far this year, compared with 3524 during the same period in 2012.

But the number is higher than the opening four months of 2008 to 2011, which included the global financial crisis.


Good time to convert Yen ?

What a love hate relationship the market has with Abenomics ,
One week they love it , then they don’t , then they do !

Japan ( Prime Minister Abe ) is trying to change a whole country the way of thinking , the way they do business , international role ! I don’t envy his task at all but he has done so much so far , he is one of the highest approval rating of any G8 nation leader and he hasn’t been in power that long!

Yen should you buy or sell ?

All comes down to greed and fear factor .
If you converted ¥ today you get 5% more than you did 2 weeks ago . But I know what some of you are saying but if I converted last year I would have 30% more ! I totally agree with you , then I ask the question why didn’t you ? As you expected it to keep strengthening ?



Unemployment figures keep improving I see USD strengthening .


Looking at the figures coming out the UK the economy is improving at a quicker than expected pace ! £ strengthens .

Euro / Yen


All comes down to the constitutional court ruling on the EBC bond purchases and is it legal !!
Beurocrats ! Mario Draghi had the balls to do something when the politicians did nothing .



Election is nearly upon us ! I can see the yen and the ozzy weakening . Could be around the 91.

My advice is if you happy with the price take it , if you in it to speculate and make money be careful , the market turn very quick and you could loose money !

Tony Evans

Yen continues to weaken, how low can it go against $/£/€/AID this week ?

We start the week with the Yen maintained losses as G7 Finance Ministers will allow the yen continue to weaken . FTSE & US market futures looks to open higher .

The Yen hit 102.21 at 4:22am lowest since October 2008 , Nikkei up 177.48points +1.21% .G-7 policy makers said they examined Japan’s strategy
and they will monitor its impact on currencies. They reaffirmed their February
commitment to “not target exchange rates” at a meeting in Aylesbury, near
London, U.K. Chancellor of the Exchequer George Osborne told reporters .

How low ?

By the end of the week II can see it trading around :

 101/102 USD

156/158 GBP

132/134 EURO

101/102 AUD



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