Join Australia's most dynamic and respected property investment community

U-S rate rise next week...

Discussion in 'Property Market Economics' started by willair, 14th Dec, 2015.

  1. willair

    willair Well-Known Member Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    1,693
    Location:
    Brisbane..
    MTR likes this.
  2. MTR

    MTR Well-Known Member Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    7,413
    Location:
    Perth, Melbourne, USA
    I think this is a good read

    What impact will this rate rise have on Australia and our dollar?


    A healthy US economy is good news for everyone, as America is still the world's largest economy. It also means a stronger US dollar, which—along with falling commodity prices—has helped push our dollar down by around 20 per cent in the past year.

    That's helping our economy as its tries to find new sources of growth beyond the mining boom. But as lift-off for US interest rates approaches, the rally in the greenback has slowed, bringing our currency's descent to a halt, at least for the time being.

    In early September, the dollar fell as low as 69 US cents, but it's been holding well above that since then, and on Monday morning was trading at 73.3 US cents.

    The surprising thing is that during this time, the iron ore price has continued to slump—hitting an eight-year low of US$40 a tonne last week.

    That should have caused our currency to fall further, but instead it rose last week.

    Why is the Australian dollar defying expectations?

    It would seem that global investors have fallen back in love with Australia, as it continues to defy the sceptics by avoiding a China-driven recession.

    Last week's solid GDP figures—which saw annual growth pick up to 2.5 per cent—gave investors another reason to buy the Australian dollar.

    That's a great vote of confidence in our economy, but it's also a doubled edge sword because a stronger dollar could derail our growth trajectory.

    Economists think the dollar will continue to fall into the 60 US cent range as US rate rises start to kick in. Still, it's a risk for the Australian economic outlook
     
  3. radson

    radson Well-Known Member

    Joined:
    4th Jul, 2015
    Posts:
    813
    Location:
    Balmain
    I cant help thinking that the Fed increasing rates tomorrow will be the most over analysed and underwhelming financial story of 2015.
     
    Bran likes this.
  4. Aaron Sice

    Aaron Sice Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    898
    Location:
    Ocean Reef, WA
    like the last one.
     
  5. Waterboy

    Waterboy Well-Known Member

    Joined:
    29th Aug, 2015
    Posts:
    326
    Location:
    Sydney
  6. Kangabanga

    Kangabanga Well-Known Member

    Joined:
    21st Jun, 2015
    Posts:
    250
    Location:
    Brisbane
    Markets will probably do what they did couple months back which is basically tank. Especially emerging markets.

    The usual will happen in Aus side, basically bank stocks will tank and banks likely have to increase rates as their cost of funding will go way up...

    Appreciating USd will cause commodities to tank further, so AUD as a commodity based currency likely to go down too.
     
  7. MTR

    MTR Well-Known Member Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    7,413
    Location:
    Perth, Melbourne, USA
    I expect $65 Au may not be out of the question
     
  8. datto

    datto Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    1,392
    Location:
    Mt Druuiitt
    Australia can counter its falling dollar by raising interest rates.
     
  9. willair

    willair Well-Known Member Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    1,693
    Location:
    Brisbane..
  10. JDP1

    JDP1 Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    2,839
    Location:
    Brisbane
    Who knows when the yanks will raise...what will it mean for us?
    Assuming all other things equal...it means the American Bourses will fall, and bring down the ASX with it. It will also mean the aud will fall.
    Depends all on where you sit on how it affects you. For most people, it will be negligible.
    Personally, I see it as a good thing. Need the dollar ideally at 70 maybe a bit below...
    Asx is ok where it's at..not great,but not bad either.. A low dollar will contribute more long term than a strong ASX will now.
     
  11. JDP1

    JDP1 Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    2,839
    Location:
    Brisbane
    If the rba raises at this point...then they want the entire nation to be like perth...
     
    datto likes this.
  12. datto

    datto Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    1,392
    Location:
    Mt Druuiitt
    ^^^^^ mabe not now. But if rate keep rising in the US the RBA wion't have a choice. Imagine if the oz dollar goes below fifty cents!
     
  13. JDP1

    JDP1 Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    2,839
    Location:
    Brisbane
    It wont be that low..the Australian economy is too stable and large for it to go that low..we are not some small speculative country town economy... And the US.. Although can eat our lunch at the schoolyard any day of the week, is not worry free..
     
  14. Waterboy

    Waterboy Well-Known Member

    Joined:
    29th Aug, 2015
    Posts:
    326
    Location:
    Sydney
    There's a generation of traders in global financial markets that have not experienced a "hiking cycle" before.

    All that free money - trillions of dollars in stimulus - is unwinding. Guess what happens next?
     
  15. Veech

    Veech Active Member

    Joined:
    19th Jun, 2015
    Posts:
    34
    Location:
    melbourne
    You want to check dollar movements in 2001. Remember seeing it @ 48.5 cents.
     
    2FAST4U likes this.
  16. JDP1

    JDP1 Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    2,839
    Location:
    Brisbane
    True..I do think though the Australian economy is stronger since then relative to the us economy.
     
  17. willair

    willair Well-Known Member Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    1,693
    Location:
    Brisbane..
    Do you think it's going to be another Lehmans unraveling where everything falls to pieces like 2008 ?,US based listed companies now get a third of their earnings internationally,and the banking sector is set up a bit different from where the bad bonds can't ricochet back ,but nothing really changed..imho..
     
  18. Waterboy

    Waterboy Well-Known Member

    Joined:
    29th Aug, 2015
    Posts:
    326
    Location:
    Sydney
    I would think that the market has already priced in a rate hike.

    It's Fed's communications on the timing and magnitude of future rate hikes that will matter.

    After all, if the Fed is confident enough to raise rates, it could signal that the US economy is doing very very well and can be seen a positive step.
     
    willair likes this.
  19. Graeme

    Graeme Well-Known Member

    Joined:
    26th Jul, 2015
    Posts:
    258
    Location:
    Melbourne
    I'd agree with @Waterboy that any rate hike is already priced in. The chances are we might even see a bounce up once it's happened as people have over-reacted.

    Overall I think that it should be a positive development:
    • Low interest rates have inflated asset prices everywhere, with the concomitant risks. There are a number of housing markets around the world that look rather bubbly to me, and a burst could be nasty.
    • It's a sign that the world's getting back to normal. That should improve the mood music.
    • There's scope to cut rates again if the economy turns south. At 0% the options are a bit limited.
    Wall Street will probably be unhappy because they've benefited from the regime. But they're big enough and daft enough to take it.

    Then again, maybe we'll all be so obsessed with the new Star Wars film that opens this week that no-one will pay any attention in the markets. :p
     
    RM1827 and willair like this.
  20. Kangabanga

    Kangabanga Well-Known Member

    Joined:
    21st Jun, 2015
    Posts:
    250
    Location:
    Brisbane
    Don't think it will be another Lehmans unravelling. A lot will depend on how much credit tightens and how fast.

    It will be very interesting to see the result of interest rate rise, which coincides with the usual year end mega fund "window dressing" .

    After past decade of excess from mining profits, aussie economy is pretty weak contrary to what most people think.. Just heard some budgets cuts gonna be in place and even with those no surplus expected till 2020...
     
    willair likes this.