Real-time thoughts & analysis of the markets, economy & more...
Co-founder & CEO of AllenWargent property advisory & buyer's agents.
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Pete Wargent blogspot
Co-founder & CEO of AllenWargent property advisory & buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place) - clients include hedge funds, resi funds, & private investors.
4 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.
"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the better property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.
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"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data and charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, and author of the New York Times bestsellers 'End Game' and 'Code Red'.
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Thursday, 14 June 2012
Why won't that pesky Aussie dollar go down?
In 2011, the Aussie dollar reached
unprecedented nosebleed levels of nearly 110.5 US cents – which was marvellous for our overseas
holidays, but very tough on exporters and the domestic tourism industry.
To give you an idea of how much the dollar had appreciated
and how quickly, a company I was working for in 2008 took out a US-dollar-denominated
convertible bond at 65 cents.
Yep, after the collapse of Lehman brothers, the Aussie
dollar really collapsed.
Interest rates in Q3, 2011:
US 0.25% UK 0.50% Australia 4.75%
The strength of the dollar was in part related to the higher
yields on assets Down Under.
Since then Australian interest rates have been cut right
back to 3.50% in the midst of low inflation prints and poor retail sales. Yet
the dollar is still clinging on to parity status with the Greenback (US
reported today that one of the world’s most powerful central banks – Germany’s
Bundesbank – has got “very serious interest” in the Australian dollar.
This reflects the relative-safe-haven reputation that
Australia has earned in recent years. The US has national debt approaching around $16 trillion, an almost implausibly high figure, and yields are very low. Europe is in a terrible mess. Where else would you put your money safely?
Ben Jarman of JP Morgan:
“What that means is that shock absorber that’s
been there in past global downturns – the currency depreciation – isn’t there
anymore, or at least is a little bit impeded. If we were to see some kind of
really bad outcome there would be a greater reliance on monetary policy to do
investment is likely to keep the Aussie dollar high and could feasibly apply at least some pressure
on Australia’s Reserve Bank to cut interest rates yet further...