subject: Australian Dollar building up for a repeat of 2008 crash? [print this page] Australian Dollar building up for a repeat of 2008 crash?
The Australian Dollar rates against almost every Currency are historically speaking very strong at present, sitting just below parity against the US Dollar and at over .72 against the Euro.
The last time the Australian Dollar saw such steady gains was before the market crashed with the economic recession in the back end of 2008. With strong exports (primarily resources and agriculture) and high interest rates the Aussie Dollar gained, reachingvery attractive rates against most majors. Whilst the Australian economy remained distant from the global recession, still performing relatively well it lost much of it's attraction to investors, but why?
Investors thought that Countries worldwide would immediately cut down on imports specifically in Australia's case China. This pushed the initial panic button, furthermore the Aussie has always been perceived as a risky' currency and these currencies will always suffer at the outset of recession or in times of economic doubt. The most noticeable drop was on AUD / USD exchange rates whichcrashed throughout 2008 (and specifically through October), hitting a low of 0.60492 vs the USD in October 2008. Since then the AUD has gained back approximately 68% as rates sit currently just below parity. Ona AUD 300,000 transfer this is a difference of over $123,000!!
We are in a very similar situation now with AUD rates sitting even higher than they were in 2008 and banks (specifically in Europe) coming under significant strain. The pressure the PIIGS (Portugal, Ireland, Italy, Greece and Spain) are putting on Europe are putting the Euro under serious scrutiny as asinglecurrency. Thedifficulties of managing a multi-state Single Currency were well aired upon the inception of the Euro and are only likely to be pulled to the forefront of pessimistic minds as struggling nationsreach out a desperate hand.The ECB bailed out Greece fairly recently and denials from Ireland regarding a similar bail-out are of a similar sounding tune, what's even more concerning is the impending shadow Portugal are casting, as they threaten to need similar action in 2011. This could even put the Euro under threat as a currency and if this happens investment again may be very swiftly cast away from the AUD as investors run into safe havens (the USD and the CHF).
It may be a little way off at the moment but baring in mind current levels, this may be an extremely attractive time to look at selling your Aussie Dollars as you can stay one step ahead of the game.
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