George Soros and his associates are considered to be legends in some circles of the currency trading market. Foreign exchange is the worlds largest financial market by a multiple of many – however it’s one of the least understood. Recent speculation that Soros is behind some small but notable trades on the Australian Dollar (circa $1bn) followed by comments that the Australian Dollar is set for a fall has put the spotlight back on what the Australian Dollar is doing.
Recent movements have seen it move close to USD$1.00 (also known as parity) and there is some speculation that with downwards pressure on interest rates, it’s only a matter of time until the dollar falls. The long term average is in the mid USD 0.70’s and we’ve seen periods when the dollar has gone much much lower. Is this likely to happen? The weight of averages would say no.
Primarily the reason for the dollar having an underlying strength has nothing, in fact, to do with the strength of the Australian Dollar, but more so the weakness of the major trading currencies that it is measured against. The volume of US dollars in the market is higher than ever, so it would stand to reason that there has been a permanent shift in the value of the AUD to USD. That being said, as our interest rates fall and commodity prices ease off, there will be fewer reasons for the AUD to say up high. However, the real question is more around when, rather than if.