This is probably going to go down in Foreign Exchange history as one of the dumbest trades ever

Australian Dollar Outlook

We were wondering about the bizarre behavior of the Australian Dollar exchange rate on some days in recent weeks.

Now we may have an explanation.

According to the WSJ, Citic Pacific, the bluest of the blue-chip Chinese companies in Hong Kong (called, naturally, a red chip), could lose HK$15.5 billion (US $2 billion), and possibly more, because of leveraged positions on the Australian dollar. Citic has a big investment in an Australian mining company.

The WSJ says “the mining investment requires the company to buy equipment and supplies in Australian dollars. It isn't unusual for companies to hedge their foreign currency exposure. But Citic Pacific did something more: It turned to structured products dubbed "accumulators" that obligated it to buy a specified amount of Australian dollars"

In this case, about nine billion Australian dollars (US$6.1 billion at current exchange rates), at a fixed price.

“The Australian dollar's sharp downturn in recent months, a side effect of the global credit crunch, has left Citic badly exposed. Already, the bets have cost the company HK$807.7 million in realized losses and would cost it HK$14.5 billion more if they were marked to market at current values. Because Citic Pacific retains open positions, the losses could deepen if the Australian dollar continues to slide against the U.S. dollar.”

Bloomberg says CITIC stock fell 66% since the disclosure on Oct 20. It has “four times more money riding on the Australian dollar than it earned last year… [with a commitment] to buy as much as A$9.44 billion … at an average price of 87 U.S. cents. The currency traded at 66.72 cents as of 7:54 p.m. in Sydney” today. This is probably going to go down in Foreign Exchange history as one of the dumbest trades ever, along with VW and Bank Negara from the 1980’s.

Pounds to Australian Dollar exchange rate is currently 2.4473 and i you need to Buy Australian Dollars a good level at present is 2.4800 if you can get it

Buy for Now

Barbara Rockefeller
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Buy Australian Dollars at the best exchange rates visit IMS Foreign Exchange or call +44 207 183 2790

Australian Dollar starts slow and improves aganist the Pound

Hi All,

The Australian Dollar is staying very volatile with the AUD exchange rate but showed a lot of fight late today climbing back over the 0.7000 against the US Dollar and the pounds to Australian Dollar exchange rate heading back to 2.4300 which was last weeks low.

The range on the pounds to Australian dollars range is what is alarming me the most as we started the day at 2.5100 and almost 3% lower. These ranges are normally what emerging currencies trade per day, not the humble Aussie dollar. Seams to me that the idea that Australia is a commodity currency and as the world slips into a recession the Australian economy is going to suffer is the main story - but wait the Australian Government hasn't yet to bail out a bank never mind 3-4 banks, our housing market is starting to pick up, you can still get a mortgage.

If I was a gambling man and it is fair to say i am by the nature of my job, the Australian Dollar may weaken yes! but against the US dollar, Swiss Franc, Euro and Japanese Yen, not against the Pound. The UK seams to be rewarded for the prompt action of the British Government rather than a sound economy!

The UK economy is one built on sticks - the banking sector delivered record bonus after record bonus that helped fuel London property prices and helped the economy boom. But what is going to happen now those bonuses are gone and the Governments non-dom tax hits home? Bankers and those in Hedge Funds are leaving the capital and those staying are going to rein things in. Money is leaking out of the loop fast and it will filter down the chain even faster as the banker earning £300k lets his nanny, cleaner and Aston Martin go as their income comes back under £60k as banks fail to pay bonuses this year. And this is only one industry the follow on effects will be huge!!!

Take care when you Buy Australian Dollars not to be to greedy the - remember that the exchange rate only 2 weeks ago was almost 2 to 1 and 2.5 to 1 is the bargain of the year as the Australian economy proves jow robust it actually is.

Good Luck and buy for now

Damian George
IMS Foreign Exchange

Buying Australian Dollars call for the best exchange rates + 44 207 183 2790

Australian Dollar Exchange Rate fights back against the Pound but Outlook suggests further Falls

Hi All,

The Pound to Australian Dollar exchange rate yesterday saw one of the most surprising rally's I have ever seen as the Dollar exchange rate went from 2.2700 to 2.7200 almost a 20% jump. The question everyone is asking is;

Why did the Australian Dollar fall by so much?

Simple answer the global economy is in melt down and foreign exchange traders around the world are having to take off complex carry trades which are bets on interest rates and now heading to the safe haven of US Dollars, Swiss Francs and Japanese Yen.

(The Australian Dollar and the New Zealand Dollar for the matter has been used as a high yielding currency and traders have been borrowing from Japan by buying Japanese Yen which current interest rate is 0.5% and investing in the Australian and NZ market at 7%+. )

Before you rush to buy Australian dollars there is further risk these trades will drag the Australian Dollar to US Dollar back to the 2001 levels 0.4775 this will correlate to a Pound to Australian Dollar Buy Rate of around 2.900/3.000 a level that most people didn't expect to see this year or next for that matter.

Traders will watch technical levels on the Australian dollar today, said Westpac's Rennie. The currency closed below 67.15 U.S. cents yesterday, a 61.8 percent retracement from its April 2001 low to a July 2008 high, according to a series of numbers known as the Fibonacci sequence. The close below that level could "open up a deeper sell- off and a long-term target to the 2001 lows at 47.75,'' wrote London-based Kevin Edgeley, a technical analyst at Goldman Sachs Group Inc. in a research note dated Oct. 8. source Bloomberg

So if you are migrating to Australia or just an expat sending money to Australia enjoy the bonus of a global meltdown/credit crisis - you are one of the very people that we benefit from the current market conditions.

Buy for now

Need to buy Australian Dollars at the best rate

Call IMS Foreign Exchange +44 207 183 2790 for a Free Australian Dollar quote.