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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Wyätt Gwyön who wrote (25572)	1/30/2005 7:52:37 PM
From: 8bits	Respond to of 110194

"the most ridiculous case is AUD, which was the biggest industrialized currency gainer two years ago and had a high beta move last year as well, but now Australia has a worse C/A deficit than the US!" I think one thing that is keeping the AUS Dollar proped up is foreign inflows into it's stock market and foreign direct investment in the mining sector (They are also a net energy exporter becuase of Natural Gas exports) Also because of it's proximity to Asia it seems to be a favored place where wealthy Japanese and Koreans buy property. (Not sure about the Chinese...) Also they have a budget surplus (although their foreign debt is rather high..) Your comments remind me though that I should look at my holdings of FAX a closed-end Australian bond fund. It was trading at a NAV discount of around 9% when I first bought it. That has narrowed to 2.84%. <<and to me it seems, if they sell foreign denominated bonds and buy USD with the proceeds, that is definitely producing upward pressure on USD just as when foreign banks sell bonds and buy USD from their exporters. the cos doing this will pay the bonds back, presumably, with locally (foreign sub) generated cash flows.>> The $64,000 question would be then how much of the cash that will be repatriated then is sitting in foreign currency (or short term investments in foreign currency..) As Coxe pointed out the money in Puerto Rico is already denominated in dollars. I tend to believe that any US corporation in Latin America or Asia (Perhaps not Japan..) would want to keep most of their money not used for daily expenses in dollars not the local currency. This certainly would have been a good strategy through the mid 90s to early 2002 when the dollar was strong and benefited from Latin American and Asian financial crises. Pre Euro, as I told Jim, I suspect most money managers would not have trusted some the European currencies (Such as the Italian Lira, etc..) and would have only kept money in currencies such as the Mark, Pound, or Swiss Franc.