Major Insitutions Catch Up to OnlineForexTrading.com on the Aussie
by Nicholas Adams Judge
This page has been recommending to readers for some time now to keep an eye on the Australian dollar as we start to get close to the turn of the year. For a while there we were alone in that respect, with few others talking about the strengths that would soon begin to prop up the tumbling Aussie.
Today, Bank of America and Barclays Capital have made similar suggestions.
It’s not surprising few observers weren’t crowing about the strong medium and long-term strengths of Australia’s dollar. The currency has been absolutely battered on several major fronts. Commodities have taken a nosedive, of course. That coincided with a major flight to safety in the wake of the credit crisis. Both New Zealand and Australia saw their economies seriously damaged by traders looking to get out of anything close to risky bets.
The Aussie, however, has an interesting relationship with global crises. On the one hand, investors will leave the small, comparatively volatile economy in the blink of an eye when crises hit. Yet, the Aussie is most closely tied, in the long run, to the price of gold.
That commodity, of course, sky rockets during times of instability. Indeed, 2008′s manic-depressive swings have combined with several other long-term factors to push gold to record heights.
That sets the stage for a potential rally in the Aussie. Since June, the Aussie has been nose-diving, declining the most of the top 19 currencies vis-a-vis the US dollar. It is now either at or within three or four cents of a genuine bottom.
That really sets the stage for a rally.
China, of course is Australia’s biggest importer of commodities, and that country just announced a $500+ billion stimulus package.
That huge bit of news finally peaked the interest of the big institutions. About a week later – today – they found that the Australian economy will probably not reach a full recession, with the Bank of America report arguing that the economy will likely just barely recede during one quarter next year.
It’s not too often you can say this: The Aussie is perhaps the safest bet you could make right now. You could buy now to be sure to beat the crowd. Or, preferably, wait for one more dip in the next several weeks, and then move when it’s at it’s very lowest. Once it gets close to US $.60, buyers will definitely start swooping in. The currency will likely rise 15-20% against the dollar in the medium term, and may continue to look strong after that.
About the Author - Nicholas Adams Judge
Nicholas Adams Judge is an editor and analyst for OnlineForexTrading.com. He is a Phd student at the Political Science Department at the University of Wisconsin - Madison. His research interests include political economy, statistical methods and American politics.
