Australia, as an investment destination, suffers from an increase in risk perceptions. Foreign capital is less willing to invest here, or buy debt issued by the banks to fund the mortgages of Aussie battlers. As a result, the Aussie dollar falls. However, the ‘magic’ of a falling dollar is that it increases the purchasing power of foreign currency.
Amongst all the panic and hand-wringing over what the volatility of the past week means, we haven’t heard much about China. Which is kind of crucial, especially for Australia. Put simply (and accurately) if China holds up, Australia will be fine. So, is China holding up?
The Aussie dollar is getting a boost from stronger commodity prices. Recent price rises have helped push the dollar higher. The Aussie dollar has had a strong start to the year. However, it may be more cyclical than anything to do with the underlying strength in the Aussie dollar.
Each year millions of traders are fixed to their screens. They’re looking for trends and momentum in the forex market. According to the Bank for International Settlements, the average daily value of forex is around US$5.3 trillion!
The main thing holding the RBA back from moving right now is weak household spending. That’s largely because of the huge debt burden households are carrying.
The cryptoconomy is a new phenomenon. It’s a digital economy made up of hundreds of different kinds of ‘currency’. These are all digital currencies.
With the Reserve Bank of Australia holding interest rates steady at 1.5% yesterday, the Aussie dollar fell back below 76 cents.
Australia is officially not in a recession! As of Wednesday this week, stronger economic growth numbers than expected reveal that our 25 year streak without a recession hasn’t been broken.
Aussie miners, BHP Billiton Ltd [ASX:BHP] and Rio Tinto Ltd [ASX:RIO] both took a heavy beating today, as commodity prices fell following gains in the USD.
If the Aussie dollar continues to march higher and economic growth falls, the RBA won’t have any other choice. The best outcome here, believe it or not, will be to cut rates.