The Aussie Dollar is picking up steam and, from New Zealand, it’s becoming even more clear why. What are the market thinking and where does it take us? We will ask that question and the answers in this article.
The Australian Dollar has picked up over the past few weeks and this has happened despite no movement in the “Means-Motion Economy” or PME (which is the UK in a nutshell). As the export sector has improved, imports have slowed down (the shift from China has triggered this). A week ago, the use of the dollar to trade against the Euro and UK pound increased, as with the other FX. These are now likely to be the world’s two largest currencies, according to the IMF.
What are the implications of the decline in the US Dollar, which is driven by consumer spending by businesses? As the US Federal Reserve and Bank of England (which are a branch of the Federal Reserve) have increased their buying, which has led to the Aussie Dollar to rise, do they anticipate that the Fed will be the one to stop the decline in the Dollar, which has been picking up? If so, what would happen to the Dollar?
One way to think about the situation is that the US Dollar is weak. If the Fed were to say that the next move will be to increase its buying, the rest of the world, the companies and countries will feel this is a weakness. Thus, they will feel that they need to increase their production to maintain their competitiveness, or even go out of business, to remain competitive.
In such a scenario, which could see the dollar fall, the effect on the Australian Dollar is a very big one. With the Aussie down about 6% at the time of writing, this could be a very tough time for businesses. What is the government thinking, that the GFC was not such a disaster?
What we need to see, therefore, is what effect these moves by multinational companies to consolidate their manufacturing and cost efficiencies will have on our employment situation and our balance of payments. Could it push the employment rate lower and give our balance of payments problem an even bigger challenge?
We must consider the implications of this on employment and cost and make the Government and the Reserve Bank aware of the situation. These are areas where we need to protect ourselves.
When Microsoft and Yahoo came in for news on the AMP and MySQL joint venture, we saw this (and others) in the news. One could read between the lines and see that the government has become concerned about China and they are restricting the growth of trade and technology. In other words, this could be about the competition.
However, a small company owner sees it differently. As the small company owner, you could probably do a version of what they are doing (although a higher percentage of your investment may well be at risk), but if you have capital or you are the owner of a company then you would do well to consider how you would be affected by these actions. This is going to be very significant in terms of the country’s future growth and the personal development of the country.
What is the point of investing your money in this business if you are going to be concerned about foreign policy and politics when you retire? The government has been quite successful in targeting individual opportunities.
This tiny company owner, however, may well decide to focus on getting a step ahead. and be more competitive in the world economy. – the process may well lead to a profit situation.