Pete Wargent blogspot

Co-founder & CEO of AllenWargent property advisory & buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place) - clients include hedge funds, resi funds, & private investors.

4 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.

"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the better property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete Wargent is one of Australia's brightest financial minds - a must-follow for articulate, accurate & in-depth analysis." - David Scutt, Business Insider, leading Australian market analyst.

"I've been investing for over 40 years & read nearly every investment book ever written yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.

"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data and charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, and author of the New York Times bestsellers 'End Game' and 'Code Red'.

"Pete's daily analysis is unputdownable" - Dr. Chris Caton, Chief Economist, BT Financial.

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Thursday, 14 June 2012

Why won't that pesky Aussie dollar go down?

In 2011, the Aussie dollar reached unprecedented nosebleed levels of nearly 110.5 US cents – which was marvellous for our overseas holidays, but very tough on exporters and the domestic tourism industry.

To give you an idea of how much the dollar had appreciated and how quickly, a company I was working for in 2008 took out a US-dollar-denominated convertible bond at 65 cents.

Yep, after the collapse of Lehman brothers, the Aussie dollar really collapsed.

Interest rates in Q3, 2011:

US 0.25%
UK 0.50%
Australia 4.75%

The strength of the dollar was in part related to the higher yields on assets Down Under.

Since then Australian interest rates have been cut right back to 3.50% in the midst of low inflation prints and poor retail sales. Yet the dollar is still clinging on to parity status with the Greenback (US dollar).

Australia Interest Rate


The Australian reported today that one of the world’s most powerful central banks – Germany’s Bundesbank – has got “very serious interest” in the Australian dollar.

This reflects the relative-safe-haven reputation that Australia has earned in recent years. The US has national debt approaching around $16 trillion, an almost implausibly high figure, and yields are very low. Europe is in a terrible mess. Where else would you put your money safely?


Ben Jarman of JP Morgan:

“What that means is that shock absorber that’s been there in past global downturns – the currency depreciation – isn’t there anymore, or at least is a little bit impeded. If we were to see some kind of really bad outcome there would be a greater reliance on monetary policy to do the work.”

Translation: foreign investment is likely to keep the Aussie dollar high and could feasibly apply at least some pressure on Australia’s Reserve Bank to cut interest rates yet further...