Why is Aussie Dollar news important?

[Dave Q]

In the media, they like to give us finance news.

And they always include the Aussie Dollar v US Dollar rate.

And for that matter, the price of gold per ounce is always included.

I was just wondering why the media thinks people are interested in these prices? For you scribes and editors out there, whats the go?

I am curious.

Cheers

Dave.

 

[roopy]

It makes a big difference for overseas travellers on the personal level - but it is also important for terms of trade.
Basically, if the dollar is going up you can look forward to overseas made goods being cheaper, but aussie companies will have a harder time exporting, so jobs could be in trouble.
As long as you keep your job, the higher it goes the better for your average punter.
Not so good for bosses and government, who need to keep our workers competitive with the rest of the world - and if we are earning more in US dollar terms, we are less competitive.

 

[Talanexor]

There's a few other reasons as well - I'll try and explain without all the economics jargon.

1 - It affects travellers, currency speculators and businesses that are exposed to trade directly.

2 - It's an important economic indicator (with the largest economy in the world, the US, as a benchmark. If the Aussie dollar increases relative to the US, it's a signal that demand for Australian exports and Australian assets is increasing. The Aussie dollar is also fairly unique in that it is a fairly accurate gauge of overall commodities prices, since we mostly export minerals and agricultural goods.

3 - When taken into account with interest rates, it's also a good indicator of how attractive Australia is for overseas investors. For example, high interest rates generally push up the value of the dollar (because foreign investors get a better return on their money), but if interest rates are low and the dollar is STILL increasing, it could mean that Australian exports or investments are very attractive (read: profitable) DESPITE low interest rates.

What it boils down for the average punter is this: when the dollar is high, everything imported gets cheaper. Just about every manufactured consumer item in Australia is imported - iPods, Plasma TVs, computers, some cars etc.

That answer your question?

 

[Dave Q]

Yes thats interesting guys, I am sincere about that...

But back to the question, are ordinary Aussies really interested in this stuff? If not, why does the media think we are.

I mean I couldnt give a rats if we lost 3 cents against the greenback tommorrow. How will that change my life in the short term?

What kind of everyday type products do we import that depend upon the exchange rate aussie v us?

Not everyone buys hi-tech all the time. You buy one good digital TV and that works till it blows up or whatever.

Do we buy our imported petrol in Us dollars?

I suppose young people being the exception, what about us senile over-30's?

 

[murraymob]

Knolwing the value of the Australian dollar is important to me .How else can i barter with the chinese hookers i like to visit

 

[Parra]

The Aussie dollar is one of the most traded currencies due to the fact that it is truly a floating currency and that it is small enough to be manipulated.

And you can bet on it.

 

[Dave Q]

So if people speculate to the point of effecting the value of the Aussie, then that sort of takes away from the theory of demand for goods etc.

If the Australian govt spent enough of its US reserves to buy the dollar and shift it up maybe that would result in cheaper fuel prices here?

But then our exports may collapse...or would they?

I suppose that depends on our competitors and whether or not they can undercut us and provide a secure supply...asuming demand still exists.

So the value of the aussie is really just a reflection of the level of gambling happening. I wonder who are the main culprits in the speculation and whether it is profitable? I suppose it must be or people wouldnt bother.

Lotto, you have one chance in millions.

A couple of billion $US invested in the Aussie and it makes a couple of cents overnight, thats a good profit.

But Fred Nerk is still scratching his head about the minutes of his time devoted to the fortunes of the aussie every day.

I read somewhere that its "natural price" was about 80-84 US cents.

 

[Different kind of Rabbit]

I work for a Swedish company importing goods into Aus.

For me, it makes a hell of a difference. Not only the AUD vs SEK but the AUD vs GBP, EUR and USD.

Changes in any of those will have a vast effect on our business. We have competitors from Asia who all seem to trade in USD here and many competitors from different parts of Europe. By tracking the swings in the Dollar I can generally tell which companies are going to be coming in hard with price reductions and trying to knock off my customers. There are other more minor effects as well. All our shipping prices are negotiated in USD so fluctuations there can cause headaches. My company will also hedge occassionally as well so it pays to be informed.

 

[Mr Angry]

Dave you will eat what your told to eat and like it.

 

[roopy]

So you are saying 'why is it taking up valuable news time?'
I'd say it is one of the more useful things in the finance report. It gives an indication of where things are headed.
Their report on shares is mostly a waste of time.

 

[Cletus]

It's important for primary producers, a lot of produce is exported (e.g. around 70% of beef produced) so it has a fairly large effect on prices.

 

[Dave Q]

Dave you will eat what your told to eat and like it.

Yeah I get that one.

I see that to some the guys here it is important information, and I understand and appreciate that and wish them well, but for me, I'm not so sure.

And if you are into the Aussie for work or whatever, you could access that figure by internet etc (along with other currencies).

We dont have a "homeless index" with news on how many people are homeless this week and whats being done. Or maybe a "crime index".

If the crime index is high in certain places, you might want to avoid going there and that could save you from a bashing or something. Maybe it doesnt change enough to warrant a daily report.

I am trying to think about a more general index. Maybe a food one, that could be worked out on the basis of availablity of produce, drought etc, and info about coles and woolworths profits. Of course that wont happen.

Then people could do something practical and stock up on certain groceries or whatever.

So we have to engage with the religion of economics. A bit like we have to engage with the geek talk on computers and learn about cookies etc.

The net and computers is full of this weird language and stuff that Im not very interested in learning about. Its a means to an end, otherwise its a bit of plastic and wires.




mmmm....

 

[Dave Q]

So you are saying 'why is it taking up valuable news time?'
I'd say it is one of the more useful things in the finance report. It gives an indication of where things are headed.
Their report on shares is mostly a waste of time.

Yeah but its often imprecise and the fact that we are down against the yen, but up against the euro by a few odd cents, doesnt mean much to me.

Its all up and down. And if the speculators are driving it, it reflects the amount of speculation doesnt it?

So it may be better to fix the currency and keep things stable like they do overseas.

The Aussie can be worth 85 cents US and leave it at that for awhile.

That might be a good price for our exporters and jobs. Of course its 6.45 cents less than it was at about 6pm today. Good grief, now Im following the Aussie! Snookered!

Ok, with my $1m US in my swiss account, Im going to buy Aussie now. Lets see how I go at the close of trade (ASX) tommorrow night.

 

[roopy]

Yeah but its often imprecise and the fact that we are down against the yen, but up against the euro by a few odd cents, doesnt mean much to me.

Its all up and down. And if the speculators are driving it, it reflects the amount of speculation doesnt it?

So it may be better to fix the currency and keep things stable like they do overseas.

The Aussie can be worth 85 cents US and leave it at that for awhile.

That might be a good price for our exporters and jobs. Of course its 6.45 cents less than it was at about 6pm today. Good grief, now Im following the Aussie! Snookered!

Ok, with my $1m US in my swiss account, Im going to buy Aussie now. Lets see how I go at the close of trade (ASX) tommorrow night.

Paul Keating said that floating the dollar has 'idiot proofed' the economy, and we saw no better example of how it works in our favour than when the GFC hit. The rest of the world had all sorts of disruptions, but our dollar dropped massive amounts almost overnight, meaning the drop in commodity prices in US dollar terms didn't affect their prices in Aus dollar terms at all - so not a coal miner, iron ore miner, wheat farmer, or factory worker was fired because he was too expensive to keep on - many lost their jobs because overseas people stopped using products - but none because we were not competitive. As the dollar goes up we are losing export jobs - but that is self correcting if it goes too far.

In short, the floating dollar saved our arses as recently as last year, and is now showing how strong we came through it.

 

[Dave Q]

During the course of my fantasy trade featured above, I lost $3,500 on the Aussie.

Im holding on the dollars and will check my situation at the end of the week!

If I make it all back plus some, then what do I do? Do I sell?

At what point do many speculators take profits. Is there an unwritten rule?

I see that Gold is going ballistic. Anyone understand that business?

 

[Solid]

During the course of my fantasy trade featured above, I lost $3,500 on the Aussie.

Im holding on the dollars and will check my situation at the end of the week!

If I make it all back plus some, then what do I do? Do I sell?

At what point do many speculators take profits. Is there an unwritten rule?

I see that Gold is going ballistic. Anyone understand that business?

My finance uni lecturer used to say...

"Well just like all speculation, whether it be currency or stocks, past performance is NOT indicative of future performance. So just give up accept that it is all luck, an accept that you don't possess better analytical skills, technical analysis, regression analyisis than others. ITS ALL LUCK!!"

 

[bartman]

During the course of my fantasy trade featured above, I lost $3,500 on the Aussie.

Im holding on the dollars and will check my situation at the end of the week!

If I make it all back plus some, then what do I do? Do I sell?

Cash in and put it all on number 2 in race 2.

I've always said that there's no difference between stockmarket and betting on horses... just different types of people are drawn to the two different speculating options.

 

[roopy]

Cash in and put it all on number 2 in race 2.

I've always said that there's no difference between stockmarket and betting on horses...

the difference is that the stockmarket returns an average 110% of your stake over a year - and betting on the horses returns an average 80% of your stake per bet - ie you make money on shares - you lose money on horses.

 

[Parra]

the difference is that the stockmarket returns an average 110% of your stake over a year - and betting on the horses returns an average 80% of your stake per bet - ie you make money on shares - you lose money on horses.

If the horse punters could rig the system like the stock punters can then they might have a chance?

110% & 80% both seem massively high expectations anyway.

 

[Dave Q]

This thread has been a lot more interesting than I thought it would become.

Real estate v Shares... any preferences lads?