The "Made in China" AUD...
by, 20th-August-2009 at 02:27 PM (2184 Views)
China's Australian blind spot - by Robert Gottlibsen
** AUD is a commodity currency and commodities = China... it's only natural to see the direct relationship established somewhat. But beyond direct commodity supply-demand, there's a more speculative relationship, as in JPYAUD carry trades... take a look at the attached chart and see how closely the currency pair is tracking the Shanghai index.Let's hope the Australian business community is starting to comprehend the far reaching implications of HSBC's latest research, which shows that the chart of the value of the Australian dollar is a mirror image of Chinese electricity production. As I explained yesterday, that means the Chinese can invest in Australia and Australians in China without a currency risk...
My suspicion at this point is simply this - in time to come, with the Chinese' conscious and deliberate effort to divest their exposure in the US$ by shifting their investment into other fixed assets such as commodities, real properties, etc... at some point, the US$ grip in the global economy will loosen resulting in further depreciation in the US$, partly due to excessive supply of the US$ due to QE and partly due to a drop in demand with the Chinese shifting their investment into non US$ based assets.
At that point the US would have no choice but to depreciate their currency (like Zimbabwe did) to reduce the runaway inflation. (The current short "termish" deflationary pressure would not stop the inflation genie if the Feds were to fail in reining in their QE by the end of this year. jmv)
When that happens, I would expect the AUD to jump in sync with the RMB... once again proving to everyone what a lucky country Australia is!
But before we reach that stage, can someone please tell Krudd and his gang to stop screwing around with the Chinese please?