Mish's Global Economic Trend Analysis Message Board

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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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From: The Vet	11/26/2009 9:45:01 PM
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The Aussie dollar goes into freefall. After a heady run up, the Aussie dollar today is crashing! Nothing too serious has shown up in the Aussie economy other than the passing of a rather ineffectual but symbolic carbon trading scheme. Inflation has been on the rise and the Reserve bank is tipped to raise rates for the third time in as many months by another .25% next week. What kills the AUD however is reversal of the carry trade and repatriation of either dollars or yen. My guess is that the Dubai scare has caused all the US funds with offshore investments as part of the carry trade to panic and try to get all their cash back into USD as quickly as possible. The AUD which is freely traded and rarely if ever seriously supported simply hasn't the depth to stand this self reinforcing process for as the ASX market drops the sellers hit the forex market with their proceeds attempting to beat the mob in the rush for the exits.. I expounded on this process a few days ago but I really didn't expect to see it so soon..

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