I have some shares priced in Australian dollars,but I don't know if they're worth hanging on to.When I bought the exchange rate was about A$ 2.86, now about A$ 2.36. But which way is the exchange rate likely to go next?

Any ideas?

Mutley,
I have'nt managed to identify a reliable cycle indicator for the AUD$ so I tend to follow the US$, BritP and the Yen instead. The next cycle turn date I have for the US$ is around the 20th of December, so I'm hoping the US$ will trend higher until that time, and the BritP, and Yen trend lower. Maybe the Aussie $ will fall into line with the other majors against the US$ around that time too, like it usually does. No gaurantees of course.

Looking at the charts, the Aussie currency is stronger than all the others since the US$ rallied. In a commodity Bull market like the one we are in now, resource rich countries like Australia should fare better than most.

Long term, I think the key to US$ strenth will revolve around events in the middle east. If the Iranians are allowed to go ahead with their plans to switch oil sales from Dollars to Euros next year, then I think the US$ will drop like a stone, and the US economy with it. This should be Bullish for the Aussie $. If they are not allowed, then there will be a fight, which will likely destabilise the US$, and so should be Bullish the Aussie $ also.

If the numbers look good around 20th December I'll post an update.


The battle for the Reserve currency crown ; http://www.currentconcerns.ch/archive/2003/04/20030409.php

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Thankyou for such a thorough reply.

I've been following the GBPAUD for some years now and its almost like the AUD has defied gravity at times. There has been numerous occasions where economic news on either side should of in all sense influenced the direction of movement, but like all things market related it just didn't. Way too much affect by the USD on the AUD.

My current thinking is the AUD has been the golden child of the FX markets for the last three years, driven by:
- resource boom, demand by china in particular, AND
- US carry trade, the OZ rates are still higher than most places, AND of course
- an insatiable demand for credit in OZ.

I dont expect it to last forever though.

The GBPAUD hit some long term lows this year, but didnt break the support. Its now bouncing around the 2.39-2.37 level, which I remember from some analysis some time ago was one of the fibo retracement levels from the heady 2001 highs. My guess is if breaks this one, then it will move on up to the 2.50 target not long after. If the UK raises rates first then then it will break 2.39

Another thing to consider, theres a very strong correlation around the price of gold (very HPC topical) and the AUD. With something like a 75% relationship chance that if gold goes up, so does the AUD (being a resource heavy dependent currency).

Here's a question. How are the taxes handled for your AU shares. Do you have to pay any capital gains tax in australia if you sell them as a foreign investor?

My 2c..

Thanks for your take on this.

I expect I will have to pay tax in the UK.

Mutley,
The US Dollar has turned around the 19th December as suggested, however it looks like it may have inverted, ie, it should have been a 'down' turn but instead it looks like it has turned 'up'. Another fairly reliable US$ cycle I use ( last, 6th of September) inverted from an expected 'down' turn to an 'up' turn also. Interestingly, these 2 turn dates are due again around the 22nd February, along with another very long term cycle ...and they are all now 'down' turns. Although it is way too early to say with any certainty, I would'nt be surprised if the US$ continued the big slide South against the AU$ and all the other majors around that time.

Meantime, I'm long the US$Dollar as of the 19th, with a tight trailing stop.


I'll try to update around the 22nd February.

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