Forex COVID-19 impact on AUD

{Note from mods - this thread split from here: Who else thinks the Sharemarket is going to tank much further?}

How would all this effect the AUD going forward...from now to 6 months?

 

FX is another beast. Do you know about Eurodollars i.e USD needed for trade and finance outside of the US? In essence due to the collapsed trade and oil price there are less dollars floating around outside the US. Those who have borrowed in USD (everyone) still need them but supply is not there. The Fed has had to implement Swaps with other major Reserve banks otherwise the USD would skyrocket. So far its working. You then have to factor in QE money printing by everyone but this may balance out as far as currency debasing goes. I would expect USD to strengthen initially due to flight to safety, fall with intervention, then strenghthen again briefly before finally crashing as in 2010/11. Or then it may do the opposite. For AUD think the opposite. Put simply, it's not simple and no one really knows. Clear as mud.

 

Yep. I’m an Investor in a business that just refinanced EUR 200m / 5 years in November at 6.75%. Face value on the bonds is already down 16.5% from issue...so running yield now 8.10%. We won’t have a problem making coupon but if we had left the refinance until now we would be cooked....

 

the reason i ask is that i have nearly 3M in USD after a recent business sale and dont know what to do with it...leave it in USD or convert to AUD..?

 

I got offered Peabody Energy Senior USD. Call in 1 year. 6% coupon at $62 now. Thats a 44% return plus/minus USD movement. Potential 50% plus return in 12 mths secured. Company has $1.5B in cash. $800m undrawn bank and $326m EBIT. But because its coal its BB rated "junk" now. Was trading close to par. You are doing well!
I said no. Probably can get it for less than $50 in a few months. They laughed and agreed. Who said bonds are for chumps.

 

You can put it in the bank of Brumbie! I am looking to get some USD exposure in this window where we are up a bit. I think if it goes bad we can easily see 50c. Do you need all of it now? You could convert some, hedge some with an ETF and keep some and while your at it change some into Yen.
When you did the deal what exchange rate where you factoring in?

 

Yeah ours is Baa2 (Moody’s) so BBB. Going forward when I have more time (semi retired?) I’ll look at adding these type of single issue opportunities and private debt to the main portfolio.

 

I get paid in USD more often than not, so I follow USD/AUD closely. In times of trouble there is usually a flight to USD. I.e AUD weakens relative.

TBH historically, at the 60c it's at now, for 3mil I would call that a big win. I sold a house over there about 18months back and agonized over when to transfer, it was only a bit over half what you are talking but still a nail biter.

I pulled the trigger at something like 69c and counted myself lucky. You have a once a lifetime timing, if you aren't needing USD in the future

 

Thanks for your thoughts, yes i agree its been some seriously good timing..i saw that 55c the other week so it got me thinking lol.

 

When we did the deal 8 weeks ago, anything under 70c was great to us....we dont need it now...tell me more about the Yen?...i have seen some references to it recently.

 

Just check the 30 year or so history, 55c don't come along often. I wouldn't be surprised if we hit it again during this crisis, but 3mil at 60c you're already a winner, well done

8 weeks ago. Golden timing.

 

Not advice but you are way ahead then and maybe dont be greedy?? I dont know your situation or if you need USD in the nearish future for you to maybe keep some.
I do know that playing FX burns up some of the smartest people on the planet. You have landed on the right side of lady luck. So maybe dont push it?

In saying that I personally do not see 70c happening in the next 3-6 months. There are more chances we will see 50c. I was joking with Yen. Its the other flight to safety currency that people like in uncertainty.

 

Does anyone have any refreshed outlook on the AUD...back at 62c today. 55c is now a long way away.