56 | AUSTRALIA WORDS | Richard Way & John Howell
FX
www.opp.org.uk | JULY & AUGUST 2012
what has happened over the last ten years has supported such a view. But sometimes you make your own luck! Since 2004 the Australian dollar has appreciated signifi cantly - by
The Great Oz Bounce A
ustralia is known as the “lucky country” by its local inhabitants and certainly
nearly 25% against the euro, more than 30% against the US dollar and close to 38% against sterling. Much of this appreciation has coincided with the onset of the fi nancial crisis in the Western world. This has made Australian imports cheaper and its exports more expensive.
Average rate for previous years AUD/EUR 2.0 Avg rate 1.6 1.2 0.8 0.4 0.0 2012 2011 2010 2009 2008 2007 2006 2005 2004 Skippy’s best mates | Will, when and how much should the Aussie dollar bounce? Average rate 2012 AUD/EUR 1.3 Avg rate
1.29 1.28 1.27 1.26 1.25 1.24 1.23 1.22 1.21
September August July June May April March February January
1.305 1.3
1.295 1.29
1.285 1.28
1.275 1.27
1.265 1.26
1.255 31 30 29 28 27 26 25 24 23 22 21 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 Daily rate - May 2012 AUD/EUR Exchange rate There were two key reasons for
this. Firstly, the Australian dollar is a commodity backed currency and the growth in the Chinese economy has resulted in a huge demand for these commodities boosting both the cost of these commodities and the Australian economy.
The Australian dollar has bounced higher than Skippy the Bush Kanagaroo. Back in 1966, when Skippy fi rst hit the TV screens, one US dollar bought you 0.89 Aussie dollars. Now it’s back about the same. But in between these dates the rate rose as high as 1.93. In the last 8 years, the AUD has gained 30% in value.
Secondly, the Australians have avoided a banking crisis and the debilitating effect this has on a country’s economy. The UK and the USA believed that you could deregulate your banks and allow a free for all. History shows this to be nonsense and history has proved to be right yet
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