Tom Scollon
Chief Editor
Last year I was so bold as to suggest the Aussie dollar could climb into the 80 cent territory. Time has proven me wrong – it happens!
Let’s look at a simple picture of the Aussie:
click chart for more detailWe need to remind ourselves that it was only four years ago when the Aussie was struggling around the 50 cent level. Once it took off in early 2003, with the rise of the share market from the ashes, it showed great promise up until the end of 2004 and then slid away. For the last 18 months it has been going no-where. For traders who trade ranges it has been a delight!
Apart from the impact of the weakening US currency on our dollar, the major driver of the Aussie’s appreciation has been the demand for our raw material in overseas markets, and that has also been a driver for our sharemarket since March 2003.
But the Materials sector has been very disappointing. Despite the record global demand for raw materials, our miners have not been able to take advantage of this super cycle opportunity. This has been due to capacity constraints at the very worst time!
Demand for the dollar has been dampened. So where we could well have seen the dollar climb into the 80 cent area, alas it has not happened. But maybe it is just as well. A dollar in the 80’s would be diabolical for our exporters – especially for manufacturers who struggle to export even at the current exchange rate.
The sideways pattern we have been experiencing with the dollar is likely to continue for some time yet, as there seems to be no strong reason for it to move up or down markedly. Maybe it is at ‘just right’ levels for the moment.
Enjoy the ride
Tom Scollon
Chief Editor