77hil

No. I do understand why the exchange rate is what it is. There just comes a point when the figure itself has no bearing in reality and is unreasonably distorted by those using the currency as a safe haven. My query is, in the long term, how long can that realistically continue for?

BadgeIsBack

Indeed. Parity means 1 dollar gets you 1 dollar at the rate of Exchange. It tells you nothing about the cost of living or purchasing power of a PC game - well not easily or directly!

MrCro

£ has had a weak start to the week, Aussie stronger against US$ which isn't helping!

MrCro

£ seemed to bottom around 1.73 again - good day today picked up 3 cents to 1.76.

Just need another 21 days the same to be back at 2.40!!!

steve_kelly_and_boys

does anyone know why it has gone up so much today

MrCro

Yes China imposed new rules that their banks had to hold higher reserves.

Plus company earnings out of USA today disappointed.

Not all is as rosey in the economic world as Australia hype leads people to believe, there are many shocks still to come.

Investors are very edgy about holding high risk high yield currencies like the aussie so doesn't take much to spook them into big sell offs. That's what happened Oct 08!

steve_kelly_and_boys

i have been watching this thread closely over the last few months and i have to say i am with you with regards to this recession having more legs
i will be interesting to see how the world copes when the stimulus packages have run out throughout the world

MrCro

Yip, I'll be making no hasty moves to send my money at these crazy rates!

Even many Australians I know well don't believe the hype and are expecting things to hit hard at some point, they are always behind the curve, true this time well behind but there is no way they will fully avoid this.

Simple world trading cycle:-

NOrmal Time: China buys commodities from Oz to make products ---> China sells products to USA and Europe ---> China buys more commodities and repeat!

Recession : China buys commodities to make products ---> USA and Europe are in the smelly stuff so buying almost non existant ---> Crafty China sees opportunity to make most of recession so keeps buying commodities to stockpile at reduced price ---> Still not selling products to USA or Europe ---> China stops buying commodities from Oz ---> Even after USA/Europe starts to recover China has stockpiled commodities at low cost so catch up required before more are bought from Oz.

mindblower

[:[/QUOTE]

all valid points about oz economy.

however, the thing that's making itworse is the state of uk ie q..easing, massive debt, no manufacturing as such, no actual plan to reduce debt, if its aaa credit rating goes i really see parity looming.

shame

steve_kelly_and_boys

have been reading that there will be no decision on the credit rating until after the general election , a lot can happen until then and all we have to do is avoid a hung parliament ( which i believe is unlikely but you never know ) i think the fact that people are talking about a hung parliament isnt helping the situation either

freebo

I agree with much of what you've said here but my concern is not so much the strong AUD as the weak GBP. We have such a high sovereign debt burden and plummeting revenues that I don't see the world (or the FX markets) giving a vote of confidence to UKPLC any time soon.

MrCro

But in FX world it's all about relative strength - look at Oct 2008 when £ spiked against the aussie $. Upto to nearly 2.70 in the shockwave after Lemman Bros went bust.

The reason that happened was weakness of A$ asgainst US$. The £ also sank against the US$ from over 2 to 1.35 at it's worst but at the same time was strong against the aussie.

So it all boils down to relative strength of aussie vs US$ - £ can be hurting and weak but relative strength against aussie does well when aussie hurts agaist US$.

FX investors like to buy oversold currencies too so the downtrodden £ is attractive to major investors as they can buy alot for their money - it only takes a surge of buying and they will jump on board and the £ will fly, regardless of all the problems the £ will remain historically a 'safer bet' and tides will flow back to £'s at some point.

What I can't predict is when!

The soveriegn debt and revenues etc don't mean weak £ currency either, the Japanese Yen is a prime example of that. Through the worst of the resession the Yen was very strong and they had suffered 10 years plus of recession with debt, interest rates etc much worse than UK.

So Yen became attractive as good investment to the big guys and also through repatriation flow of funds by Japanese investors.

The UK and the £ are still highly regarded and this will not be just forgotton and replaced by the likes of the AUD, these have been a unique & strange few years and by no means the new norm!

mindblower

:[/QUOTE]

may asw well forget any upward move until tories in

spartacus

parity? 1:1?

Jesus, if that happens I'm out of here.

Centurion

OMG - who in their right mind would vote for Gordon Brown ??!!??