1 Euro is now 1.35 AUD - WTF?

Irish Slaves for Europe

With the euro on the verge of collapse I was expecting the Aussie dollar to have strenthed significantly and to be at about 1.25 or around that, but the opposite appears to have happened with the dollar weakening a considerable amount. Anyone know why thats happened?

mandrake04

60 billion wiped of the ASX today and that makes 100 billion this week, which is not good the world is on the verge of a global market collapse.

Its looking particularly ropey at the moment for every country including Australia, time to batten down the hatches and see wether we can dodge another bullet. Still would rather be here than back home that's for sure.

Would be a bad time to lodge a skilled migration visa shortly after this stage in 2008 Chris Evans reduced the immigration intake and people got stuck in limbo land for 3 years.

massdebater

I was about to transfer my savings across last week at $1.31 but held off. Sitting just below $1.35 now.

Will it continue to get higher or should I be glad of the wee rise and do the transfer now? I haven't a clue about financial markets and I have €10k to transfer so don't wan't to get it wrong. Maybe I should send half the money now and see what happens???

lima

Bite the bullet, send it over now and get the deadly interest rates... that's what I just done

hussey

It's been like this for some time ...

gonna move to economy, not really a travel question

Tora Bora

Australia, is a one trick pony! Little more than a quarry for China!
China, depends too much on a steady / growing world economy, to keep its own economy on track.
Right now the world is teetering on another recession with poor enough performance in USA, and Europe in turmoil.
The foremost world politicians, continue to show themselves as backward and incompetent in dealing with the global crisis.
Euro leraders cannot get their heads around the Euro crisis, and continue to buy time, instead of dealing with the core debt issue.
US ........... what can I say. The political classes insisted on playing poker right up to midnight with the debt ceiling issue. Disgracefull.

Anyway, if and when there is another global recession, Australia, because of it's massive concentration on mining, will take an absolute hammer blow:(:( Too many eggs in one basket.

G'day mate:o

jank

Follow it logically...

The US and EU are facing another big recession where options are running a tad thin,less confidence for people in these markets, less demand for consumer goods and products, less imports from China, China exports and makes less goods, China's economy slows down, China imports less raw materials from Australia, commodity prices lower, mining companies such as RIO and BHP suffer losses due to less demand for raw materials that are now cheaper, Australian economy suffers, interest rates in Australia lower, Australian dollar becomes cheaper due to money flowing out of the AUD to other safe havens such as the Swiss Franc and the Yen.

May have missed a few steps... Its all about China but IMO its all short term. Medium term and long term Australia is a good bet

johnnyskeleton

Irish Slaves for Europe wrote: »

With the euro on the verge of collapse I was expecting the Aussie dollar to have strenthed significantly and to be at about 1.25 or around that, but the opposite appears to have happened with the dollar weakening a considerable amount. Anyone know why thats happened?

Rumors of the euros demise have been greatly exaggerated.

Count Dooku

later12

I think the primary misunderstanding that the OP makes is that the Euro is on the verge of collapse. The Euro itself is not on the verge of collapse, of course. Although some of its peripheral economies may be in serious trouble, the currency itself is here to stay, and is held together in the centre by 7 AAA economies.

If the Eurozone did fracture, one of the most likely outcomes would be that it would soar relative to the new European currencies. Why? Because those economeis at the centre of Europe are each of them gold plated. The Euro would be the new Deutsch Mark. That is one reason why, even if the Euro fractures, forex traders are interested in it.

But there are lots of reasons. Maybe if the OP goes into greater detail as to why he specifically finds the strength of the Euro so incredible relative to the AUD, it might be easier to address.

FlashD

Tora Bora wrote: »

Australia, is a one trick pony! Little more than a quarry for China!
China, depends too much on a steady / growing world economy, to keep its own economy on track.

Anyway, if and when there is another global recession, Australia, because of it's massive concentration on mining, will take an absolute hammer blow:(:( Too many eggs in one basket.

G'day mate:o

I agree, Australia are a one trick pony for the above reason but I don't agree that they will get a 'hammer blow'.

They didn't in 2008, just a downturn but they had plenty in reserves to stay stable, unlike us they didn't take all their surplus cash and blow it on houses.

As for the euro, i'm confident it's not going anywhere.

Regards.

Irish Slaves for Europe

later10 wrote: »

But there are lots of reasons. Maybe if the OP goes into greater detail as to why he specifically finds the strength of the Euro so incredible relative to the AUD, it might be easier to address.

The general consensus amongst economists is that Italy will need a bailout. Given the scale of the bailout needed, the EU will have no choice but to engage in quantitative easing, or else allow inflation to rise significantly. Both these scenarios would devalue the euro.

Even forgetting about Italy, we know its a virtual certainty at this stage that Ireland will need another bailout in late 2012/2013. The effect of the December budget will ensure the Irish economy shrinks next year and we can expect the same the year after that. We are in a downward spiral for at least the next 3 years. Until the EU comes up with a way of writing off some of these debts, Ireland will remain locked out of the bond markets. There is absolutely no realistic scenario in our current situation where the markets would want to lend to Ireland again unless something drastic is done.

Then there are other countries like Cyprus which will need a bailout in the next 6 months due to their exposure to Greek debt.

Then you have to consider the contamination effects of Cyprus and Italy needing bailouts- likely to push Spain over the edge.

So in summary, Europe has unsustainable debt levels which will bring down the euro in the next year or so.

Australia on the other hand never even went into recession. They were virutally uneffected by the last crisis in 2007/2008 and will be uneffected by this crisis. The lack of growth and jobs in Europe will ensure Australia experiences high levels of immigration for the next 10 years. China's growth will continue regardless of the problems in the US and Europe, and this will ensure Australia will continue to experience healthy growth levels.

Also, Australia has no where near the debt levels of European countries and the US. And yes while house prices are overvalued, and will experience a crash of about 10-20%, this will have no where near the level of effect it had on the Irish economy.

Debtocracy

Irish Slaves for Europe wrote: »

Also, Australia has no where near the debt levels of European countries and the US. And yes while house prices are overvalued, and will experience a crash of about 10-20%, this will have no where near the level of effect it had on the Irish economy.

Australia uses a debt-based fiat money system and has experienced large growth in the last decade. This can only lead to one thing – a major recession. Just check out the household debt to income ratio to see that Australia is on the verge of such an event. This is guaranteed in the next few years unless the Australian economy works outside the boundaries of physical laws (and can grow exponentially). The only way to stave off a major recession is through exponential money printing – to keep up with the exponentially growing debt. The problem with exponential money printing is that there comes a point where no one wants to own fiat money and hyper-inflation ensues. The U.S. is currently in the middle of the money printing stage while the EU is in the beginning. So if you want to protect your wealth – own stuff which cannot be printed and which retains its value during a major financial crisis.

irishh_bob

Tora Bora wrote: »

Australia, is a one trick pony! Little more than a quarry for China!
China, depends too much on a steady / growing world economy, to keep its own economy on track.
Right now the world is teetering on another recession with poor enough performance in USA, and Europe in turmoil.
The foremost world politicians, continue to show themselves as backward and incompetent in dealing with the global crisis.
Euro leraders cannot get their heads around the Euro crisis, and continue to buy time, instead of dealing with the core debt issue.
US ........... what can I say. The political classes insisted on playing poker right up to midnight with the debt ceiling issue. Disgracefull.

Anyway, if and when there is another global recession, Australia, because of it's massive concentration on mining, will take an absolute hammer blow:(:( Too many eggs in one basket.

G'day mate:o

nonsense , this isnt saudi arabia were talking about with oil , australia is a highly sophisticated broad based economy , sure its had a massive mining boom due to demand from china this past decade but it has many other strings to its bow , australia ( like canada ) is one of the countries which will weather the storms in the coming years

irishh_bob

Debtocracy wrote: »

Australia uses a debt-based fiat money system and has experienced large growth in the last decade. This can only lead to one thing – a major recession. Just check out the household debt to income ratio to see that Australia is on the verge of such an event. This is guaranteed in the next few years unless the Australian economy works outside the boundaries of physical laws (and can grow exponentially). The only way to stave off a major recession is through exponential money printing – to keep up with the exponentially growing debt. The problem with exponential money printing is that there comes a point where no one wants to own fiat money and hyper-inflation ensues. The U.S. is currently in the middle of the money printing stage while the EU is in the beginning. So if you want to protect your wealth – own stuff which cannot be printed and which retains its value during a major financial crisis.

yeah , gold , i know , one thing ive been wondering though , if the world tips over into a rescession and it has been shown that money printing done little good , interest rates will rise and what will follow is a period of deflation , all commodities ( including gold ) will be hit big time , that is unless we return to the gold standard of course

later12

Irish Slaves for Europe wrote: »

The general consensus amongst economists is that Italy will need a bailout.

Not really, the consensus appears to have shifted either toward integration or some form of fracture in which the Euro itself will still survive, either way it's a strong Euro.

Given the scale of the bailout needed, the EU will have no choice but to engage in quantitative easing, or else allow inflation to rise significantly. Both these scenarios would devalue the euro.

Quantitative easing already happens in Europe through the ECB's SMP, and will continue to happen with the reformed EFSF - it doesn't actually have to mean serious inflation.

Even forgetting about Italy, we know its a virtual certainty at this stage that Ireland will need another bailout in late 2012/2013. The effect of the December budget will ensure the Irish economy shrinks next year and we can expect the same the year after that. We are in a downward spiral for at least the next 3 years. Until the EU comes up with a way of writing off some of these debts, Ireland will remain locked out of the bond markets. There is absolutely no realistic scenario in our current situation where the markets would want to lend to Ireland again unless something drastic is done.

Ireland is not significant enough in itself to damage the Euro, nor is Greece and nor is Cyprus. I think you are getting the various issues mixed up. The strength of the Euro is not necessarily nor directly related to sovereign debt crises on the European periphery.

Just because my house goes on fire doesn't mean I've lost my job as well. Just because the periphery of Europe is burning it doesn't mean that everything European goes up in smoke.

So in summary, Europe has unsustainable debt levels which will bring down the euro in the next year or so.

You've skipped a few steps there. in any case, why would it bring down the Euro? Even if it fractured, why would the gold plated central core not just go on alone with this major world currency?

There is no transfer union, and they haven't as yet put so much money into the European periphery that they will fall with the periphery.

And yes while house prices are overvalued, and will experience a crash of about 10-20%, this will have no where near the level of effect it had on the Irish economy.

Where are you getting 10-20%?

Marcusm

The AUD collapsed from 1.03 to 1.51 to USD between July and November 2008 due to two principal factors, (1) the impact of the global recession on demand for China's goods and the knock On effect on Australia's extractive industry and (2) the unwind of the global carry trade where global investors borrow JPY and invested in AUD and other higher yielding currencies in anticiPation of a free ride (ie pick up the extra yield but not expect the currency depreciation.

Large fx jumps are to be expected on commodities dependent economies. Whether a new global recession would trigger a 40% fall in AUD may be les likely.

Irish Slaves for Europe

later10 wrote: »

Not really, the consensus appears to have shifted either toward integration or some form of fracture in which the Euro itself will still survive, either way it's a strong Euro.

No they haven't. Any anyway, you can throw around meaningless words like "integration" and "fracture" all you like, it doesn't change the fact that Italy needs a bailout. Their bond interest rates are above 6% which is generally thought of as unsustanstainable, next week its likely to be above 7% given whats happening in the US.

later10 wrote: »

Ireland is not significant enough in itself to damage the Euro, nor is Greece and nor is Cyprus.

Its that sort of thinking thats got us into this mess. We've seen the contagion spread from one country to the next weakest country, and yet still France and Germany dither and fail to come up with a comprehensive solution to the crisis.

later10 wrote: »

Where are you getting 10-20%?

Long term median house prices as a % of median salary.

later12

Irish Slaves for Europe wrote: »

No they haven't. Any anyway, you can throw around meaningless words like "integration" and "fracture" all you like, it doesn't change the fact that Italy needs a bailout.

Italy and later Spain are not in a position to be given bailouts - it's really down to a some form of default and then fracture of the Eurozone, or a supersizing and overhaul of the EFSF to raise Eurobonds, i.e. integration. These are not meaningless words -there is no reasonably way that Italy can merely be given European bailout loans at this stage.

Its that sort of thinking thats got us into this mess. We've seen the contagion spread from one country to the next weakest country, and yet still France and Germany dither and fail to come up with a comprehensive solution to the crisis.

That's really not related to how the - pretty esoteric - Irish crisis should affect the Euro in a negative way.

Long term median house prices as a % of median salary.

What a strange answer; yes I know what the pi ratio is - where are you getting the idea that there should be a crash (correction) of 10-20% is what I am asking, though.

Irish Slaves for Europe

later10 wrote: »

What a strange answer; yes I know what the pi ratio is - where are you getting the idea that there should be a crash (correction) of 10-20% is what I am asking, though.

Experience basically, prices won't stay at the high level they are at now for too long because they are not sustainable. Once first time buyers are priced out of the market then its the beginning of the end and thats whats happening now in Australia.

Interest rates in oz are also likely to be increased next month due to the high levels of inflation they are experiencing, so that could trigger a correction in the market.

old_aussie

Tora Bora wrote: »

.

Anyway, if and when there is another global recession, Australia, because of it's massive concentration on mining, will take an absolute hammer blow:(:( Too many eggs in one basket.

G'day mate:o

At least we haven't dropped the entire basket like the PIGS of the EU

Australia might be a "one trick pony", but next year the economy will again be in surplus.


Australia is in a good trading position.


http://www.smh.com.au/business/australias-unsung-surplus-20110804-1icsk.html


At least we're not one of the PIGS of the EU and having to be told by the EU and IMF how to run our country.


When Ireland is on top,(like whenever that will be) then give us advice on how to become a "Two trick pony".

I'm sure your expert advice will be taken on board by our finance minister.

OP, change your Euros to A$ sooner than later.

later12

Irish Slaves for Europe wrote: »

Experience basically, prices won't stay at the high level they are at now for too long

No but really, the 10-20% figure, I'm sure it couldn't have simply been plucked out of thin air, a wild guess; how exactly did you arrive at it?

Irish Slaves for Europe

later10 wrote: »

No but really, the 10-20% figure, I'm sure it couldn't have simply been plucked out of thin air, a wild guess; how exactly did you arrive at it?

I've already told you, the current mean salary to mean house price % is about 10-20% above the long term average, thats what I am basing it on. Its just my opinion, I don't have a crystal ball, maybe the excess is justified given the population increase, who knows.

later12

Irish Slaves for Europe wrote: »

I've already told you, the current mean salary to mean house price % is about 10-20% above the long term average, thats what I am basing it on. Its just my opinion, I don't have a crystal ball, maybe the excess is justified given the population increase, who knows.

It's a little strange that you would imply that a correction ends when houses simply delve into the territory of affordability. Just because a thing is suddenly affordable, does not mean that other factors (like taxes, anticipated salary cuts, job instability, weak consumer sentiment, financial crises, currency crises, and falling knife syndrome) render a purchase unattractive.

Some research suggests that for regular householders in Ireland, this stage of affordability has been reached for couple buying residential property - so by your logic, one should have assumed that house prices in Ireland would have stopped falling by now.

Yet Australia is severely unaffordable, and prices are still rising. If affordability indices are not correcting house prices in the booms, why on earth should they be correcting house prices in the busts? This has not been the experience elsewhere.

I'm really not sure what the point of this thread is, some personal diatribe against Europe?

Count Dooku

Irish Slaves for Europe wrote: »

I've already told you, the current mean salary to mean house price % is about 10-20% above the long term average, thats what I am basing it on. Its just my opinion, I don't have a crystal ball, maybe the excess is justified given the population increase, who knows.

Australian house prices 56 per cent over valued: The Economist

Friday, March 4, 2011 18:44:00
The economic journal of record, The Economist, says Australian homes remain the most overvalued in the world. It's given fresh life to the debate over whether the Australian housing market is a bubble. The Economist says Australian housing is over-priced by 56 per cent.

FlashD

What's with all the scaremongering? It's driving money out of the country.

The Euro isn't going to collapse, not now, not ever!

When are we going to get some balance on all these threads?

Regards.

Irish Slaves for Europe

later10 wrote: »

Some research suggests that for regular householders in Ireland, this stage of affordability has been reached for couple buying residential property - so by your logic, one should have assumed that house prices in Ireland would have stopped falling by now.

No I never claimed affordability was the only factor. In Ireland obviously banks aren't lending, we have many harsh budgets coming up which will take billions out of the economy, we will have the household charges coming in, and fear is also a big factor with no one certain they will still have a job in 6 months time. Obviously when the economy is doing well and credit is easy, then buyers take less notice of affordability.

later10 wrote: »

Yet Australia is severely unaffordable, and prices are still rising. If affordability indices are not correcting house prices in the booms, why on earth should they be correcting house prices in the busts? This has not been the experience elsewhere.

Yes it has been experienced virtually everywhere during times of boom and bust. During boom years there is a lot of easy money going around, confidence is at its highest, people think the good times will last forever, people think they can buy a house and sell it in a year for an easy 10% increase in price. People overstretch themselves and think if they don't get on the property market now then they will never be able to afford it. Once the market reaches breaking point as it is now in oz then all it takes is a small trigger for the affordability indices to come into play and start correcting the market, as I said I think interest rate rises next month will be that trigger.

later10 wrote: »

I'm really not sure what the point of this thread is, some personal diatribe against Europe?

I started it to get other peoples opinions on why the Aus dollar weakened, as was obvious in my opening post. I expected it to have strenthened, but hey, since my opinion differs from yours obviously my opinion is a "diatribe" against the euro.

When are people like you going to open your eyes and see whats happening out there. The debt bomb has exploded, its the end of the line for Europe and the US. They've been using debt like a massive pyramid scheme, it became a game of whoever could borrow the most could grow the most. Now the markets have had enough of this. We have a long period of decline to look forward to.

Battleneter

old_aussie wrote: »

At least we haven't dropped the entire basket like the PIGS of the EU

Australia might be a "one trick pony", but next year the economy will again be in surplus.


Australia is in a good trading position.


http://www.smh.com.au/business/australias-unsung-surplus-20110804-1icsk.html


At least we're not one of the PIGS of the EU and having to be told by the EU and IMF how to run our country.


When Ireland is on top,(like whenever that will be) then give us advice on how to become a "Two trick pony".

I'm sure your expert advice will be taken on board by our finance minister.

OP, change your Euros to A$ sooner than later.

Australia is also a two speed economy.

90% of the economy is experiencing a fair bit of pain currently, while the 10% of the economy that is the related to the mining sector continues to boom.

Retail is Australia is currently experiencing some of its weakest demand on record, while the housing market is now clearly started to fall (after the 2008 Aus government prop up stimulus, stupid move.)

Add in the soon to be introduced Carbon tax, the average Austrlain is not feeling too positive about the economy atm


None of the above has much to do with the $AU, its all about a weak $US and Euro. Aus is loosing the currency war, a race to the bottom.

Essien

I was planning on transferring some savings (roughly €10k) from an AIB account to my Westpac account here in Oz due to the excellent interest rates offered here. What exactly does this mean for me?

Should I ship it or not?

irishh_bob

Essien wrote: »

I was planning on transferring some savings (roughly €10k) from an AIB account to my Westpac account here in Oz due to the excellent interest rates offered here. What exactly does this mean for me?

Should I ship it or not?

if your going to do it , do it quick , unless we have full fiscal union within a few months , the euro is going to weaken due to the apparent need to print money to cover italian and spanish debt , the euro is buying something like 1 . 36 aussie dollars at the moment , it could be closer to 1 . 21 by year end

thisNthat

FlashD wrote: »

As for the euro, i'm confident it's not going anywhere.

Regards.

And how exactly did you arrive at this little Gem??

Tora Bora

thisNthat wrote: »

And how exactly did you arrive at this little Gem??

It's a damn nuiscence for Germany, to have to prop up the peripheral economies. It's a severe headache to have to prop up Spain and Italy.
However, allowing Spain and its to completely unravel, and most likely the euro as a result, would be totally catastrophic for Germany.
The euro area is the biggest mark for the German exporting economy. Allowing the euro to collapse, is simply not in Germany's interest.
That's why the euro is going nowhere fast.

irishh_bob

Tora Bora wrote: »

It's a damn nuiscence for Germany, to have to prop up the peripheral economies. It's a severe headache to have to prop up Spain and Italy.
However, allowing Spain and its to completely unravel, and most likely the euro as a result, would be totally catastrophic for Germany.
The euro area is the biggest mark for the German exporting economy. Allowing the euro to collapse, is simply not in Germany's interest.
That's why the euro is going nowhere fast.

completley agree , germany has the most to loose if the euro fails but in order to keep it alive , they will have to engage in QE , this will inevitabley weaken the euro , the only thing that could strengthen the single currency now is a ( more or less ) over night integration of the european economys , thats politcally impossible

maninasia

johnnyskeleton wrote: »

Rumors of the euros demise have been greatly exaggerated.

I can only see it weakening as the USD and other currencies gain relative strength. If Europe is loaded down with debt it may need to start printing money.I agree with above posters, the Euro will be supported as it has been good for Germany and they want to maintain a European integrated financial zone, however the support of QE will weaken it.