Aussie Dollar Update
#1
BE Enthusiast
Thread Starter
Joined: Dec 2004
Posts: 524
Aussie Dollar Update
The RBA kept their rates on hold this week at 7.25%, in what was a widely anticipated move by the market. The decision follows recent data pointing to a slowdown in domestic demand, reflecting the impact of four rate hikes since August. Rising fuel and energy costs have curbed consumer spending, and the Bank will want to continue to monitor the effects their rate hikes have had before taking any further action.
The RBA, however, does remain on a tightening bias and most analysts believe that the central bank could hike rates again before the end of the year (twice) with the first rise potentially coming in August, depending on inflation data and pressure on the economy.
Inflation is also the central focus for the Bank of England. After the UK left their interest rates unchanged at 5% last month, the minutes from their meeting confirmed market expectations that rates could be left on hold for some time. The decision today, and subsequent minutes two weeks later, should provide more clarity on their current stance.
So how has this affected the $AUD?
Once again the AUD continued to strengthen against the Pound throughout May reaching a low of just over $2.03, a 10 cent difference from the month’s high of almost $2.13. The high interest rates offer extremely good yields and therefore attract foreign investment; the greater the demand for Aussie Dollars, the stronger the currency and hence the exchange rate goes down. When you combine this with the slowdown in the UK economy and the drop in the housing market, it explains why we have seen such a sharp decline in the exchange rate.
The rates have now dropped almost 25 cents from the beginning of the year, which would be a difference of $25,000 if you were moving £100,000 across to start your new life with.
Can it go any lower?
Unfortunately we can’t rule this possibility out, as we saw in the mid 90’s when it hit just below $1.88 back in 1996. The psychological $2.00 is being widely cited as the next key level and there is little evidence suggesting that we won’t see this in the coming weeks. However, as the credit crunch has proven, nobody can predict where the markets will go and as such the decision about when best to send over your money will be different from person to person.
It is important to remember that the rate of exchange is not going to be the reason you have chosen Australia, with the lure of fantastic job and lifestyle opportunities for yourselves and your children most probably being the decision for your move. However, you will all want as many dollars to start your new life with as possible, and so learning about your options and managing your exposure properly is critical in making this happen.
There are different ways to move your funds abroad and different strategies that you can adopt. For those who feel that they wish to protect themselves against any further loss then there are options to fix into a rate of exchange with a 10% deposit. Those with a bit more risk appetite and optimism may adopt a hedging strategy or chose to set a “market order” which is essentially an automatic buying tool at a predetermined rate.
I hope this helps, but if you have any quesitons then please feel free to contact us.
Cheers,
Richard.
The RBA, however, does remain on a tightening bias and most analysts believe that the central bank could hike rates again before the end of the year (twice) with the first rise potentially coming in August, depending on inflation data and pressure on the economy.
Inflation is also the central focus for the Bank of England. After the UK left their interest rates unchanged at 5% last month, the minutes from their meeting confirmed market expectations that rates could be left on hold for some time. The decision today, and subsequent minutes two weeks later, should provide more clarity on their current stance.
So how has this affected the $AUD?
Once again the AUD continued to strengthen against the Pound throughout May reaching a low of just over $2.03, a 10 cent difference from the month’s high of almost $2.13. The high interest rates offer extremely good yields and therefore attract foreign investment; the greater the demand for Aussie Dollars, the stronger the currency and hence the exchange rate goes down. When you combine this with the slowdown in the UK economy and the drop in the housing market, it explains why we have seen such a sharp decline in the exchange rate.
The rates have now dropped almost 25 cents from the beginning of the year, which would be a difference of $25,000 if you were moving £100,000 across to start your new life with.
Can it go any lower?
Unfortunately we can’t rule this possibility out, as we saw in the mid 90’s when it hit just below $1.88 back in 1996. The psychological $2.00 is being widely cited as the next key level and there is little evidence suggesting that we won’t see this in the coming weeks. However, as the credit crunch has proven, nobody can predict where the markets will go and as such the decision about when best to send over your money will be different from person to person.
It is important to remember that the rate of exchange is not going to be the reason you have chosen Australia, with the lure of fantastic job and lifestyle opportunities for yourselves and your children most probably being the decision for your move. However, you will all want as many dollars to start your new life with as possible, and so learning about your options and managing your exposure properly is critical in making this happen.
There are different ways to move your funds abroad and different strategies that you can adopt. For those who feel that they wish to protect themselves against any further loss then there are options to fix into a rate of exchange with a 10% deposit. Those with a bit more risk appetite and optimism may adopt a hedging strategy or chose to set a “market order” which is essentially an automatic buying tool at a predetermined rate.
I hope this helps, but if you have any quesitons then please feel free to contact us.
Cheers,
Richard.
#2
Forum Regular
Joined: Apr 2006
Location: QLD
Posts: 80
Re: Aussie Dollar Update
Hi Richard
Having read your post with interest,what options/advice can you offer, when it comes to transferring funds from UK to Australia?
It seems to be a lottery at the moment you pick your numbers and hope for the best.
Having read your post with interest,what options/advice can you offer, when it comes to transferring funds from UK to Australia?
It seems to be a lottery at the moment you pick your numbers and hope for the best.
#3
BE Enthusiast
Thread Starter
Joined: Dec 2004
Posts: 524
Re: Aussie Dollar Update
There are a few options available to you, depending on your situation and depending on your views on risk etc.
The two main ways to send your funds abroad are:
1. A "spot" buy, or buy now pay now.
This can be done for all, or a portion of your funds and means you fix the rate on the day, send us the money and we send it across to OZ for you. Very simple and straightforward, and there is no risk as you no what rate you are getting.
2. A "forward" contract, or buy now pay later option, whereby you fix the rate on the day, but you only send us a 10% deposit. You then set a date up to 2 years in the future to pay the remainder, which is useful should you be selling a house and not have all of the funds available.
The delivery date can also be changed if, for example, your house sale is delayed, and this incurs no extra cost (if you bring the date forward, then there can be an adjustment to the rate, so always opt for the earlier date).
Again there is no risk involved with this method, and you have peace of mind knowing how many dollars you will receive.
There is a tool that you can use called a "market order", or target rate, which I touched on in the article. You set a level that you would like to achieve (2.30 for example) and then if the market should get to this then we would buy the currency on your behalf and contact you to send the money across, which can be done on a spot or forward basis.
There is no right or wrong answer as nobody can predict where the markets are going - you need to ask yourself how much risk am i willing to take? What can i afford to lose? Most people will rent for 6-12 months initially and so may not require their funds straight away, so may take the decision to leave their funds in the UK. However, what if the rate doesn't improve? And interest rates are higher in OZ so you will get a better return on your funds down there.
One popular option at the moment is to adopt a hedging strategy and send your funds over in chunks, thus spreading the risk. If you do decide to leave funds here then wwe will simplye get you set up with our Sydney branch and they can then continue to work with you to find the most appropriate strategy.
Hope this helps,
Feel free to call us if you would like to run through your options in more detail.
Cheers,
Richard.
#4
Re: Aussie Dollar Update
Hi Richard,
Any advice for those of us in Euroland? I transferred money recently with HiFX and will be transferring the funds from our house sale early next week
Irish Gal
Any advice for those of us in Euroland? I transferred money recently with HiFX and will be transferring the funds from our house sale early next week
Irish Gal
#5
Re: Aussie Dollar Update
The RBA kept their rates on hold this week at 7.25%, in what was a widely anticipated move by the market. The decision follows recent data pointing to a slowdown in domestic demand, reflecting the impact of four rate hikes since August. Rising fuel and energy costs have curbed consumer spending, and the Bank will want to continue to monitor the effects their rate hikes have had before taking any further action.
The RBA, however, does remain on a tightening bias and most analysts believe that the central bank could hike rates again before the end of the year (twice) with the first rise potentially coming in August, depending on inflation data and pressure on the economy.
Inflation is also the central focus for the Bank of England. After the UK left their interest rates unchanged at 5% last month, the minutes from their meeting confirmed market expectations that rates could be left on hold for some time. The decision today, and subsequent minutes two weeks later, should provide more clarity on their current stance.
So how has this affected the $AUD?
Once again the AUD continued to strengthen against the Pound throughout May reaching a low of just over $2.03, a 10 cent difference from the month’s high of almost $2.13. The high interest rates offer extremely good yields and therefore attract foreign investment; the greater the demand for Aussie Dollars, the stronger the currency and hence the exchange rate goes down. When you combine this with the slowdown in the UK economy and the drop in the housing market, it explains why we have seen such a sharp decline in the exchange rate.
The rates have now dropped almost 25 cents from the beginning of the year, which would be a difference of $25,000 if you were moving £100,000 across to start your new life with.
Can it go any lower?
Unfortunately we can’t rule this possibility out, as we saw in the mid 90’s when it hit just below $1.88 back in 1996. The psychological $2.00 is being widely cited as the next key level and there is little evidence suggesting that we won’t see this in the coming weeks. However, as the credit crunch has proven, nobody can predict where the markets will go and as such the decision about when best to send over your money will be different from person to person.
It is important to remember that the rate of exchange is not going to be the reason you have chosen Australia, with the lure of fantastic job and lifestyle opportunities for yourselves and your children most probably being the decision for your move. However, you will all want as many dollars to start your new life with as possible, and so learning about your options and managing your exposure properly is critical in making this happen.
There are different ways to move your funds abroad and different strategies that you can adopt. For those who feel that they wish to protect themselves against any further loss then there are options to fix into a rate of exchange with a 10% deposit. Those with a bit more risk appetite and optimism may adopt a hedging strategy or chose to set a “market order” which is essentially an automatic buying tool at a predetermined rate.
I hope this helps, but if you have any quesitons then please feel free to contact us.
Cheers,
Richard.
The RBA, however, does remain on a tightening bias and most analysts believe that the central bank could hike rates again before the end of the year (twice) with the first rise potentially coming in August, depending on inflation data and pressure on the economy.
Inflation is also the central focus for the Bank of England. After the UK left their interest rates unchanged at 5% last month, the minutes from their meeting confirmed market expectations that rates could be left on hold for some time. The decision today, and subsequent minutes two weeks later, should provide more clarity on their current stance.
So how has this affected the $AUD?
Once again the AUD continued to strengthen against the Pound throughout May reaching a low of just over $2.03, a 10 cent difference from the month’s high of almost $2.13. The high interest rates offer extremely good yields and therefore attract foreign investment; the greater the demand for Aussie Dollars, the stronger the currency and hence the exchange rate goes down. When you combine this with the slowdown in the UK economy and the drop in the housing market, it explains why we have seen such a sharp decline in the exchange rate.
The rates have now dropped almost 25 cents from the beginning of the year, which would be a difference of $25,000 if you were moving £100,000 across to start your new life with.
Can it go any lower?
Unfortunately we can’t rule this possibility out, as we saw in the mid 90’s when it hit just below $1.88 back in 1996. The psychological $2.00 is being widely cited as the next key level and there is little evidence suggesting that we won’t see this in the coming weeks. However, as the credit crunch has proven, nobody can predict where the markets will go and as such the decision about when best to send over your money will be different from person to person.
It is important to remember that the rate of exchange is not going to be the reason you have chosen Australia, with the lure of fantastic job and lifestyle opportunities for yourselves and your children most probably being the decision for your move. However, you will all want as many dollars to start your new life with as possible, and so learning about your options and managing your exposure properly is critical in making this happen.
There are different ways to move your funds abroad and different strategies that you can adopt. For those who feel that they wish to protect themselves against any further loss then there are options to fix into a rate of exchange with a 10% deposit. Those with a bit more risk appetite and optimism may adopt a hedging strategy or chose to set a “market order” which is essentially an automatic buying tool at a predetermined rate.
I hope this helps, but if you have any quesitons then please feel free to contact us.
Cheers,
Richard.
But now rate rises on sterling are predicted across the next year, so what are your opinions on this?
Regards,
T.
#6
BE Enthusiast
Thread Starter
Joined: Dec 2004
Posts: 524
Re: Aussie Dollar Update
Thanks for your question T.
You are correct, certain people within the speculative market have changed their view over the last few weeks to now expect an increase in interest rates in the UK over the coming months.
The Bank of England have said that they are being over ambitious with their views and would not rule out some rate rises, whilst at the same time, certain economists are still asking for a rate cut. I would agree and say that these are definietly uncertain and potentially risky times.
We must highlight that interest rate rises don't lead to currency strength, a great example of this is the US Dollar.
Interest rates are only one of the factors that move the markets.
Regards
Richard
You are correct, certain people within the speculative market have changed their view over the last few weeks to now expect an increase in interest rates in the UK over the coming months.
The Bank of England have said that they are being over ambitious with their views and would not rule out some rate rises, whilst at the same time, certain economists are still asking for a rate cut. I would agree and say that these are definietly uncertain and potentially risky times.
We must highlight that interest rate rises don't lead to currency strength, a great example of this is the US Dollar.
Interest rates are only one of the factors that move the markets.
Regards
Richard
#7
Re: Aussie Dollar Update
Thanks for your question T.
You are correct, certain people within the speculative market have changed their view over the last few weeks to now expect an increase in interest rates in the UK over the coming months.
The Bank of England have said that they are being over ambitious with their views and would not rule out some rate rises, whilst at the same time, certain economists are still asking for a rate cut. I would agree and say that these are definietly uncertain and potentially risky times.
We must highlight that interest rate rises don't lead to currency strength, a great example of this is the US Dollar.
Interest rates are only one of the factors that move the markets.
Regards
Richard
You are correct, certain people within the speculative market have changed their view over the last few weeks to now expect an increase in interest rates in the UK over the coming months.
The Bank of England have said that they are being over ambitious with their views and would not rule out some rate rises, whilst at the same time, certain economists are still asking for a rate cut. I would agree and say that these are definietly uncertain and potentially risky times.
We must highlight that interest rate rises don't lead to currency strength, a great example of this is the US Dollar.
Interest rates are only one of the factors that move the markets.
Regards
Richard
#8
Banned
Joined: May 2008
Location: Lagrange 2
Posts: 1,507
Re: Aussie Dollar Update
I think that the issue is not actually the exchange rate but if you can get a house in Australia easily.
If it was me I'd get my money over to Australia from UK as quickly as possible because of the differentials in the economy. Indeed if I was moving to Australia then housing would be essential and so the prosaics become a bit theoretical.
Once you decide to go and have the funds from a house sale in UK then the decision is surely what rate you can get now and who can you trust to transfer the money. There are actually bigger decisions than you think.
If it was me I'd get my money over to Australia from UK as quickly as possible because of the differentials in the economy. Indeed if I was moving to Australia then housing would be essential and so the prosaics become a bit theoretical.
Once you decide to go and have the funds from a house sale in UK then the decision is surely what rate you can get now and who can you trust to transfer the money. There are actually bigger decisions than you think.
#9
Just Joined
Joined: Jan 2008
Posts: 27
Re: Aussie Dollar Update
Hey Irish Gal
You could try www.currency.ie . They're based in Ireland, part of TransferMate Group. Friends have used them and their rates kill the banks
You could try www.currency.ie . They're based in Ireland, part of TransferMate Group. Friends have used them and their rates kill the banks