bcworld

...this (falls this week) has more to do with the Aussie addiction for debt based investing and the fact that one of the margin lending companies effectively ran out of liquid cash the other day.....really spooked the market. I do agree with you however that this idea that Aus is somehow now largely immune to what happens in the US is completely untested. The stock market clearly doesn't think so, in much the same way that the Shanghai market doesn't seem to think China is immune.

As for the effect all this has on exchange rates, who knows....I suppose it all depends on what the reserve bank does......Bank of England will almost certainly drop rates next time around.

MartinLuther

It's a good job the FTSE wasn't affected by the fall out from the US Sub Prime market otherwise the exchange rate would be all over the place

alipally

The rate is still pants!
I'm about the put the house on the market and if the rate doesn't improve by June then we're considering reinvesting in a small UK property until it improves.... and renting out until there some positive movement in the market.
I hope that we don't have to do this, but it's important to keep your options open!

Ali x

sprite_green

It's swings and roundabouts...

Would I want to be buying a UK property at the moment - probably not.
Do I want to exhange our lifesavings right now - probably not.
Will we hedge our bets by leaving the bulk in the UK until the rate improves - probably.

A couple of points to note:
1. The A$ hit a 10 year low for us a couple of weeks ago.
2. It could be worth putting out a limit order (e.g. say to OzForex that you would like to exchange 33% of your funds when/if the £:A$ hits 2.30; another 33% when/if it hits 2.40; and leave the remaining 33% uncommitted - I believe that these can even be forward orders too - i.e. not necessarily immediate, but a forward commitment backed up with a 5 to 10% deposit). The exhange rate is very volatile at the moment - twice I have had my "alerts" triggered overnight ( ) when it has hit 2.28 and 2.29.
3. I am no economist, but I think we are likely to see even more volatility over the next few months - the US has cut interest rates by 1.25% in the last 10 days. That's a massive movement on one of the most important influencing factors in one of the most dominant currencies. And it still may not be enough to avoid a recession!
4. Don't forget that you can get a significantly better interest rate on savings in Aus (e.g. 7.2% with Bankwest) - make sure you do the maths to understand how much of an exchange rate movement you would need to outweigh the interest rate difference.
5. The whole subject of taxation of any gains is very unclear, but remember, we are only talking about taxing a gain - i.e. you have benefited from it, but will (potentially) lose some of that benefit to tax.

Just my thoughts.

ianhutch1

Im tired of watching the exchange rate have decided today to stop worrying about it and just transfer our money over, hopefully it will be a bit better by the time the house sale comes through.

edit: just got a rate of 2.21 from ozforex I think i'll wait a bit longer.......

ianhutch1

What a nightmare its down to 2.16 now

Have to transfer this week and have absolutely no idea what to do now.

spartacus

Do you have to transfer now?

Can the monies not sit in a UK account for a while?

The dollar is at a ten year high.

The market is very volatile at the moment. Not so long ago the pounds jumped 15 cents in a day.

ianhutch1

We are leaving for Perth in under 2 weeks so its getting pretty close now to the point where we dont have a choice.

Our house sale money can stay in the UK but our savings have to go with us from the start so we can buy my wife a car and get an apartment, what worries me more than anything is 4 weeks ago the rate was 2.25 and we didnt transfer as "it cant go any lower" and look at it now, where is it going to stop and is it best to just transfer now to avoid any further drops....

sprite_green

Ian - who knows what will happen to the £:$. Couple of comments from the OzForex weekly watch thing:
i.e. the difference between the UK and Aus IRs is expected to widen by 0.5%.

Quite often these widely predicted changes in IR are factored in to the price early (i.e. everyone takes it as a given). The drop in the rate could even be due to this.

It may be worth waiting until after Tuesday/Thursday's decision to see the reaction.

Alternatively, setup a few limit orders (at 2.22, 2.26 perhaps) and try to pick off the peaks of the better rates over the next few days.

Karma sent - horrible position to be in (although we are only 6 weeks "behind you").

ianhutch1

I was just reading that on Ozforex actually and was about to ask what the UK drop and AU rise in interest rates would do to the market, sounds like that could make the rate a bit better for us.

What are limit orders? Sorry im clueless when it comes to this!

Thanks for the help and karma

spartacus

As Sprite was saying, these anticipated interest rate changes are factored into the echange rates markets already. Very often i've noticed an actual Oz interest rate increase results in downward pressure on the dollar.

sprite_green

No, sorry Ian - the UK drop is likely to make the A$ more attractive - especially in combination with an Aussie raise.

Basically, it makes Australia a more attractive place to deposit large sums of money (i.e. for Investment Banks, etc.). Net effect is it normally signals a drop in the exchange rate (as people sell £ and buy A$).

The point I was trying to make earlier was that perhaps this is already priced into the rate (its normally heavily anticipated). If either of these moves doesn't happen then we could see a small bounce.

NOTE - I'm not an economist!

Regarding limit orders...

You can place an order with OzForex (and probably the other brokers) to say "Please exchange £20k if/when the rate hits £1:A$2.26". This order will sit with OzForex and will not be triggered until 2.26.

The benefit is that the rate is very volatile at the moment, and its possible to see dramatic swings - especially overnight (i.e. when we are only checking it once every hour rather than refreshing a real-time graph on Yahoo ).

SG

ianhutch1

So it looks like we are stumped either way!

I'll hang on until Thursday and then just exchange no matter what the rate is, can spend the rest of my life worrying about this

Thanks again.

@boy

Even better, if you want some good economics advice and are willing to look a little further than just the exchange rate ups and downs.....

http://www.dailyreckoning.com.au/daily-reckoning/

Possums

exactly right we transferred ours and made a pretty good bit of interest with the bank by the time we got here.

also could be a good time to dabble with the stock market as people will be panic selling