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John from Moneycorp

The Pound vs Australian dollar

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Everyone wants the best exchange rate when they move, but be careful what you ask for. Think about why it went the way it did in the last few years and why it's suddenly changing and what this suggests about how the economic situation is changing here.

 

It's unlikely to have a huge impact on my industry (pharma), or my wifes (teaching). People will always need innovative medicines, whether the economy is good or not.

 

The main reasons behind the AUD weakening are China and the federal stimulus potentially coming to an end, which may actually help again from my perspective by lowering house prices in Oz. I do appreciate that what is good news for me may be bad news for someone else, so will try to reign in my enthusiasm slightly though.

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Guest sithewindows

Do you not think it was over valued then since 2009?

Everyone wants the best exchange rate when they move, but be careful what you ask for. Think about why it went the way it did in the last few years and why it's suddenly changing and what this suggests about how the economic situation is changing here.

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Do you not think it was over valued then since 2009?

 

It's been very high but currencies (unless artificially pegged) find their own level and are worth what the market is willing to pay. Despite all the numbers, economic activity is largely a reflection of confidence, and although there's invariably a lag between what the person 'on the ground' knows and feels and what the figures show, these converge at some point. It was inevitable that the Aus dollar would drop, not only through factors in other countries but because Australian confidence in and of itself is down.

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The Australian dollar is weaker following minutes released from the Reserve Bank of Australia's policy meeting on June 4.

 

In the minutes, the RBA said they were open to further interest rate cuts and that the Aussie dollar could fall further as commodity prices slide.

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Latest review is below, thanks.

 

There was nothing to choose between the Australian and New Zealand dollars. Both fell by more than 2% against sterling and by twice that much against the US dollar.

 

A dearth of Australian economic data meant the Aussie had nothing with which to defend itself against the flow of negative sentiment towards all commodity-related and emerging-market currencies. When the US Federal Reserve chairman set out on Wednesday a road map to the wind-down of his $85bn-a-month quantitative easing programme he was not telling investors anything they did not already know but he made it all sound much more imminent and scary.

 

The newly-and brightly-illuminated writing on the wall sent equity and bond prices lower and put the US dollar on an upward trajectory. The hardest-hit currencies were those that had gained most benefit from the Fed's QE largesse and had most to lose from its cessation.

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Latest currency review is below, thanks.

 

The Aussie's week was much more satisfying than the previous one had been. It strengthened by half a cent against the US dollar and by a cent against sterling.

 

A barrage of expectation management from the US Federal Reserve was successful in persuading investors to tone down their slightly hysterical response to the US Federal Reserve's warning of an end to quantitative easing. The effect was to propel the commodity currencies to the top of the ladder, leaving the "major" currencies behind.

 

There was little among the economic statistics to help the Australian dollar. Bank lending to the private sector continued to increase by a worthwhile 0.3% a month and the manufacturing sector purchasing managers' index jumped six points to 49.6, is strongest reading in more than a year. This Tuesday the Reserve Bank of Australia is expected to keep its benchmark interest rate steady at 2.75% but is also likely to hint at a lower rate in the future.

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Guest Stewarts

We plan to return to the UK for a couple of months as often as possible in the years ahead. We are considering transferring $30000 to a sterling denominated account/deposit as a kitty and hedge against the likely medium/longterm decline in the $/sterling exchange rate. Any advice on possible options to do this as cheaply and effectively as possible would be appreciated. StewartS

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We plan to return to the UK for a couple of months as often as possible in the years ahead. We are considering transferring $30000 to a sterling denominated account/deposit as a kitty and hedge against the likely medium/longterm decline in the $/sterling exchange rate. Any advice on possible options to do this as cheaply and effectively as possible would be appreciated. StewartS

 

 

Hi Stewarts, we return to the UK usually once a year for 3-4 weeksor so, we did keep our UK bank account, comes in useful when buying gifts for relatives back home, we normally transfer spending money through our internet banking with the Commonwealth Bank, they have a $22 flat fee so the more you send the less % this fee becomes, how there exchange rate compares with others really became irrelavent with the relative small amounts, but our UK bank also charged a fee for recieving the deposits, but we do watch the general dollar/pound rate and judge accordingly.

However you are talking about quite a large sum here, which may fair better in a good interest savings account here than trying to beat the fluctuating exchange rate, the interest on savings accounts here in Oz are a lot better than the UK at present. I am sure you will get heaps of varied advice on this forum so you either you take some further proffesional financial advice or make your enquiries and research befor you can make your own considered judgement call.

Good luck

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Guest sithewindows

The £ has gained 10% on the $ this year so I dont think the small amount of interest on savings is really an issue.

Hi Stewarts, we return to the UK usually once a year for 3-4 weeksor so, we did keep our UK bank account, comes in useful when buying gifts for relatives back home, we normally transfer spending money through our internet banking with the Commonwealth Bank, they have a $22 flat fee so the more you send the less % this fee becomes, how there exchange rate compares with others really became irrelavent with the relative small amounts, but our UK bank also charged a fee for recieving the deposits, but we do watch the general dollar/pound rate and judge accordingly.

However you are talking about quite a large sum here, which may fair better in a good interest savings account here than trying to beat the fluctuating exchange rate, the interest on savings accounts here in Oz are a lot better than the UK at present. I am sure you will get heaps of varied advice on this forum so you either you take some further proffesional financial advice or make your enquiries and research befor you can make your own considered judgement call.

Good luck

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But 12 months ago who knew what the $ was going to do? it was still gaining strength then! who knows what it is going to do in the next 12 months or 60 months as I would guess the $30,000 is not for only 1 visit.

A good savings account is money guaranteed against hopeful beneficial currency rates! we will all have differing views on how the rates (exchange and interest) may go and each one will be hopeful/biased as to whether you are coming or going. In the end its your money and you will have to decide and be comfortable with your decission.

I have done many exchanges and I have both pleased and kicked myself, but now I content myself that I believe I made the right choice at that particular time.

 

Again I wish you good luck and please let me know if you get some good insider information or your crystal ball supplier!!

 

PS. I personnally would not be sending money over now as i think the $ is going to weaken further in the near future, but that is my personnal view only, but who really knows?

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The Australian dollar has weakened against most major currencies after comments from the Reserve Bank of Australia Governor Glenn Stevens. In his statement, he said that the downward phase of the investment boom in the country is likely to pose significant challenges.

 

He also cautioned about a ‘strong currency that still threatens many areas of economy’.

 

These comments have led to a weaker Aussie dollar against the pound.

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Guest Sunflower12906
The Australian dollar has weakened against most major currencies after comments from the Reserve Bank of Australia Governor Glenn Stevens. In his statement, he said that the downward phase of the investment boom in the country is likely to pose significant challenges.

 

He also cautioned about a ‘strong currency that still threatens many areas of economy’.

 

These comments have led to a weaker Aussie dollar against the pound.

 

glad I booked and paid for my holiday in American $$ when i did ...got $1.06

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The Australian dollar has weakened against most major currencies after comments from the Reserve Bank of Australia Governor Glenn Stevens. In his statement, he said that the downward phase of the investment boom in the country is likely to pose significant challenges.

 

He also cautioned about a ‘strong currency that still threatens many areas of economy’.

 

These comments have led to a weaker Aussie dollar against the pound.

 

Yep, it was as frank a warning as you'll ever get from a reserve bank governor.

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But 12 months ago who knew what the $ was going to do? it was still gaining strength then! who knows what it is going to do in the next 12 months or 60 months as I would guess the $30,000 is not for only 1 visit.

A good savings account is money guaranteed against hopeful beneficial currency rates! we will all have differing views on how the rates (exchange and interest) may go and each one will be hopeful/biased as to whether you are coming or going. In the end its your money and you will have to decide and be comfortable with your decission.

I have done many exchanges and I have both pleased and kicked myself, but now I content myself that I believe I made the right choice at that particular time.

Again I wish you good luck and please let me know if you get some good insider information or your crystal ball supplier!!

 

PS. I personnally would not be sending money over now as i think the $ is going to weaken further in the near future, but that is my personnal view only, but who really knows?

 

Guys, with reference to my previous post, I confess that having to break off to attend to work problems, It seems that the auto save did not full capture everything and I did not proof read before sending, therefor I would like to edit/correct my personal view as follow-------- I personally think the $ is still weakening and would be looking at sending some money to the UK now (or buying other currency) and I would not be buying Aus$ just yet.

 

Sorry about that but it just goes to prove you can not always take what you read as being correct, always do your own research and be content with what you decide.

 

I also still have some US$ travellers c'qs I bought when at $1.08, dead money now, no interest, inflation slowly eating away at it, will I make a small gain if sell them now or do I wait for the Aus$ to weaken some more??? should I have cashed them in after my holiday and put in a saving account? Oh hum.

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The latest currency review is below, thanks.

 

In a busy week the US dollar was the top performer, strengthening by one and a half cents against the Aussie and by three and a half against the pound. The Australian dollar was steady against the euro and the Japanese yen.

 

The Australian dollar suffered a hit on Tuesday when the Reserve Bank of Australia kept its benchmark interest rate steady at 2.75% and reiterated that "the inflation outlook... may provide some scope for further easing." The comment should not have come as a surprise to investors but they didn't like it anyway. It suffered another on Friday when the US employment data came in much stronger than expected, increasing the likelihood that the US Federal Reserve would soon begin to wind down its quantitative easing programme.

 

Although the Aussie lost ground to the US dollar on the news, the pound lost more.

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The latest Australian dollar review is below.

Had it not been for the US dollar's even worse performance the Aussie would have found itself at the bottom of the pile last week. It lost more than a cent to sterling and collected less than a cent against the week's biggest loser.

Investors continue to obsess about the US Federal Reserve, their white knuckles hooked around hair triggers. Last week it was the Fed chairman's promise of "highly-accommodative monetary policy for the foreseeable future" that got them moving, sending the US dollar south as quickly as it had risen seven days earlier. Every currency gained ground against the Greenback but the Aussie's pickings were meagre.

Some 40% of Australia's exports go to China and the economy of that country is slowing. Investors fancy that reduced Chinese demand will continue to weigh on the Australia's own economy and its currency.

The latest Reserve Bank of Australia minutes suggest that the Australian dollar was doing enough for now to stimulate the economy – the minutes also indicated a further interest rate cut is unlikely in the short term.

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Personally I feel that there may be worse to come........

 

China is doing the right think and from what I see they are doing very well. They are trying to rebalance their economy by turning it from an export dependant economy to a combination of export and domestic demand.

 

Euro is in trouble and will continue to suppress world demand. Germany is propping up the Euro for now however elections are approaching quickly and may increase ill feeling towards the med countries.

 

UK IS recovering with only earnings holding things back at the moment. These will start to increase shortly (best do as I've not had an increase in 4 years!) simply to keep up with inflation, house prices etc. Economy is better balanced than previously however this now gives good reason to suppress the £ to help exports but not my pocket if transferring funds!

 

USA the worst to last! I personally do not beleive you resolve a huge national debt problem by producing more and more money to devalue the currency and therefore the debt. Inflation will potentially become run away and it is only because the us$ is the workds currency that they get away with it. USA has major problems and we would not invest long term in US investments. USA is also riding the crest of a very cheap energy wave with large oil finds and fracking for gas......their energy is almost free! At the moment USA is feeling very good for itself like a financial drug high, lots of cheap money, loads of cheap energy and a currency which is holding its own (just) against global currencies which are weak or intentionally being held back. Like all highs, they are usually followed by the lows!

 

Australia is in a great position compared to most, it has natural resources, a highly trained and young workforce and potential only bettered by some of the BRIC economies although they need to be run much better than currently to realise their potential. Australia has been going through a high and yes tougher times are likely ahead however long term i beleive things continue to look good.

 

S

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Cheers John, some encouraging data from the UK this morning seems to have helped the pound a little too.

 

Yes, some good news for the pound this morning.

 

UK unemployment falls by 57,000 to 2.51 million in the three months to May.

 

Minutes from Mark Carney's (new Governor of the Bank of England) first monetary policy meeting were released this morning – these showed he voted against more quantitative easing.

Edited by John from Moneycorp

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Hi All

 

Please find this weeks currency update below

 

A difficult but by no means disastrous week for the Aussie left it at the back end of the field. It lost half a cent to the pound and the US dollar.

 

Wednesday was a difficult day for the Australian dollar. At roughly the same time the Australian consumer price index data showed inflation slowing to 2.4% and China's manufacturing sector purchasing managers' index fell by half a point to 47.7. The inflation number was bad for the Aussie because it made lower interest rates more likely. The Chinese PMI was bad because a slowdown in Chinese manufacturing means reduced demand for Australian minerals and energy exports from its biggest customer.

 

Sterling's performance was tepid despite the UK economy expanding by 0.6% in the second quarter of the year. Though the figure was double that of the first quarter, it was exactly as investors had expected; because of that, they sold the pound.

 

Moving into this week, the Aussie lost ground overnight taking the GBP/AUD back to the highs we saw a few weeks ago this is in reaction to Glenn Stephens (Governer of the RBA) speaking overnight, he said second-quarter inflation data suggests there’s still room to lower interest rates if required and that he wouldn’t be surprised if the currency dropped further.

 

The Australian dollar dropped as traders added to bets the RBA will reduce the benchmark rate by a quarter percentage point at next week’s meeting.

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Mid market rate hovering around 1.69 AUD to the pound at the moment which looks likes it's the highest it's been for nearly 5 years. Getting better for people on the way over here.

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Guest sithewindows

This should make it a bit easier for anyone coming with a few quid. We got 2.25 - 2.40 when we came in 2007, shame we went back to the UK and changed it back again. We are on count down now, less than two weeks till we fly out again so I have been watching closely. Still wont know what to do though in regards to changing money.

Mid market rate hovering around 1.69 AUD to the pound at the moment which looks likes it's the highest it's been for nearly 5 years. Getting better for people on the way over here.

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Guest sithewindows

Just crept over the 1.70 hill and then rolled back a bit.

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Please see a monthly review below on the Australian dollar – attention turns to the Reserve Bank of Australia and their interest rate decision tomorrow.

 

July was another awful month for the Australian dollar. In June it came last among the ten most actively traded currencies and in July it was at the bottom of the table again. The losses last month were less severe though: In June the Aussie fell by 5% against the pound and by 5.5% against the euro while in July those declines were "only" 2.5% and 4%. Since the beginning of the year the Australian dollar has fallen by 9% against the pound and by 16.5% against the euro.

 

In most countries the authorities would be devastated to see their currency trashed like that. But the Australian government and the Reserve Bank of Australia have maintained for ages that their dollar is too strong. Even after this year's fall they apparently still feel the same way. RBA governor Glenn Stevens said in late July "It would not be a major surprise if a further decline occurred over time." To help it on its way, the governor also hinted at an interest rate cut in the pipeline, which would further diminish the attraction of the AUD to investors.

 

And the background for the Aussie dollar is still a difficult one. Nearly a third of Australia's exports - mainly iron ore and coal for making steel - go to China. Chinese demand has fallen as the recession and its after-shocks have led to dwindling demand for the export products that China builds with that steel. Falling demand for coal and iron ore means lower prices for them, so Australia is exporting less stuff and having to sell it more cheaply. That, in turn, means less demand for the Australian dollars that customers use to pay for the country's exports.

 

It is not a new situation but it is one that continues to weigh on the Aussie dollar. The end of the mining boom means that Australia will need new industries to fill the economic gaps, not least the tax gap. In the next four years, taxes paid by companies to the government are expected to fall by A$10bn. That means either lower government spending or increased taxes elsewhere. The first of these will be a tax on bank deposits, which starts in January 2016.

 

There is no consensus about what would be a "fair" value for the Australian dollar but there is general agreement - and not just in Canberra - that it is somewhat lower than its current level. From its highs four months ago the currency has fallen by 14% against the pound and by 22% against the euro. That might sound a lot but the Aussie still has a way to fall if (and it is "if") it is to return to its pre-global-financial-crisis levels.

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