AUD 01 (May 08 - Feb 12)

[winston]

Darryl Guppy mentioned that there's a double top on the AUD and the Support is around 0.78

[Chinaman]

Hi Bro MM,
May I consult your opinion on forex matter…thinking of putting 30K here?

Maybank is offering good rates . Minimum amount only AUD10K and now the interest rate for 1month is 4.1% and 6months 4.35%.

Foreign Currency Time Deposit ( 1 mth, 3 mth , 6 mth )
Australian Dollar 10K (4.10% 4.15% 4.35% )

[mojo_]

wonder what's the credit rating of Westpac?

Business Times - 11 Jun 2010

Westpac offers high-interest Aussie dollar deposits
By CONRAD TAN

(SINGAPORE) Westpac Private Bank has launched an aggressive campaign to attract Australian-dollar deposits from the rich here.

The private banking arm of Australia's Westpac Bank is offering an interest rate of 5.2 per cent for 12-month fixed deposits of A$250,000 (S$293,000) or more.

For shorter-term fixed deposits, the bank is offering an interest rate of 4.75 per cent per annum for up to three months, and 5 per cent per annum for up to six months.

The campaign 'signals our goal to increase our total market share for the Australian dollar in Singapore', said Sean Straton, Westpac's head of private banking in Singapore.

By comparison, Australian-dollar fixed deposits at the Singapore banks now earn annual interest of 4.23-4.49 per cent for six months and 4.68-4.94 per cent for 12 months, for sums of A$250,000 or more.

ANZ Bank, an Australian rival of Westpac, offers interest rates of 4.19 per cent for Australian-dollar fixed deposits of six to 12 months, for customers here who place A$250,000 or more at the bank.

Those are rates quoted for the banks' retail customers. Banks are known to offer preferential rates to their wealthier, private-banking clients.

Westpac has no plans to compete in the Singapore mass market - unlike ANZ, which recently took over Royal Bank of Scotland's Asian retail and commercial banking businesses, Westpac does not have a licence for retail banking here.

Like ANZ, Westpac has a large retail banking network in Australia and New Zealand.

In Asia, however, Westpac operates as a wholesale bank, offering corporate, institutional and private banking products and services, with Singapore as its regional headquarters. It has 80 people here, including 15 in its private banking team.

Elsewhere in Asia, Westpac also has a similar-sized private banking team in Hong Kong, a branch in Shanghai and representative offices in Beijing, Jakarta and Mumbai.

The bank is 'very conservative' but it does plan to hire more staff, likely doubling its private-banking team here to 30 in the next five years, Mr Straton said.

The Singapore office now has some 2,000 private banking clients, he said, though he declined to disclose the size of the client assets it manages.

In recent years, the private bank here has built up a niche, offering home loans to wealthy clients in Singapore, Malaysia and Indonesia keen to buy properties in Australia and New Zealand. That includes Australian and New Zealand expatriates working in Southeast Asia, he said. This demand has been growing - new business for the bank in the past six months has tripled from the same period a year ago, he said.

[kennynah]

this is one issue that all FCFD players face...

the inverse relationship between Interest Rates and fx currency fluctuations risk....

simply... whenever IR is high ... the risk of that currency tumbling during the fixed deposit period is also high...

you very seldom have a situation where currency run up continuously along with increasing interest rates..at first yes..but not usually for too long a period...not impossible..but usually not sustainable...

of cos there are exceptions...

example...if you are willing to play it early... you could consider FCFD USD...and although it is now paying very low interests...you are trying to secure a good fx rate NOW...and hoping that in that time that you lock up your USD in the bank... Fed increases rates..and when that happens...USD will appreciate against SGD (likely)

but if you wait until Fed increases it lending rates to 5%... you betcha USD would have become so expensive that it is well matured for it to drop from the tree...so, if you get in at that time...you get 5% say for 12 months...but during that time, Fed could reduce rates and out of the blue... you kana hit with a falling USD so badly that the 5% is not enough to compensate for the losses in fx....

so, my take to C's question is simply this...

a) are you looking at yield
or
b) are you looking at fx currency appreciation?

if you are looking at interest rate play...and the amount of FCFD is significant...and i mean really large sum...then, you must protect your fx risks...by going into th fx market and do a hedge...

but if you are looking at fx currency play...FCFD is a wrong instrument to use...

[mojo_]

good considerations.

the other question i have is why this commodity currency has such high int rate while others like NZD and CND have much lower rates? what are the risks that make it have to offer such high rates (Aussie govt budget expected to turn into surplus soon, gdp rosy and unemployment half that of US/UK)

[kennynah]

bro mojo...

you gotta read Keynesian economics to get to the theoretical answers...

but my gor jiam opinion is this...

along with fiscal policies (like taxations, govt budgetary expenditures), govt use monetary policies (interest rates) to control economic activities which have a direct impact for the demand and supply of currency, leading to fx fluctuations of the currency... you will recall that kangeroo land was in serious trouble 2 years ago when the world threatened to collapse along with US.... trade slowed... consumption of commodities stalled... practically everyone on earth was eating porridge... and consequently, industrial production slowed... no need for so much fuel to run the mills/factories/plants/etc...

kangerooland was slowing down so very badly that they had to jump start their economy....so came the Quantitative Easing (which means nothing more than dig hole A to cover up hole B along roadside to create jobs)...and lowering IR to encourage borrowings...yada yada yada...all these you already know well...

but then....skarly.... they over did it...miscalculated that china needed alot of coal/iron ore/this and that/etc...and then US recovery was rather swift, that suddenly, they over heated....

they had to halt their overheating by INCREASING their IRs to soak up excessive money supply floating around in their economy...and so, we witnessed high IRs and an increasing AUD....

now... they had their IR so high.... it looks to the kangeroos that they might be suffering from britney spears syndrome (opps...i did it again )... and that's why we hear their CB suggesting no more rate hikes...for now...

but why NZD has smaller IR... becos they sell milk/eggs/sheep meat.... not so much iron ore...not heavy duty commodities that the world over needs... so, they suffered lesser economic slowdown in 2007-2009... they didnt have to engage so much monetary policy to control their economic activities....

CND is too damn close to US to deviate too much their monetary policy from US.... (ps : i'm assuming you mean canadian dollar = CAD)

[mojo_]

Thanks K, 3 woofs for your reply

So it's the monetary policy and the risks are just exchange rate risks as monetary policy shifts. The fiscal position is sound so no devaluation risks. Arigato gozaimasu!

[kennynah]

eh wait...i hope i got it right...hahahaha...

imo, currency devaluation risks is highly likely only in one scenario... a run away inflation.... mostly, countries will refrain from artificially devaluing their currency as the negative consequences can be extremely severe...

[mojo_]

but the monetary policy is and will be set to tackle inflation and overheating mah so lessening chance of runaway inflation tio bo?

[kennynah]

yes sir.... that is the intention.... and we assume we have very competent people who will do this... and clearly, we have seen what happened in Vietnam (recent years) and indonesia (10+ years ago)...that poor governance can create huge pressure on currencies...

but as much as monetary policies can help arrest overheating or boost economic activities... the mere fact that there are countries that consistently run a trade deficit, low GDP, not conducive tax regulations, generally poor social and business environment....these all can cause a sudden dump on the currency as soon as a catalyst calls for it.... and without proper defensive mechanism...that country's CB cannot defend its currency losses... like malaysia a few years ago....but luckily it was rich enough to halt the attack in time to secure international assistance...

but for vietnam..... a coup...a massive virus pandemic.... finito.... Dong gets attack...nobody cares..nobody wants their banana money... she has not enuf reserves to defend her Dong... bo pian...drop lor....drop and drop and drop.... last time use 5Dong to pay 1 packet of rice...a week later 50K Dong for the same rice... pocket oso not so big to hold 50K stash of cash....what to do... devalue lor...

so..in short...fx fluctuates for many many reasons... which makes fx trading the purest fundamental play ..(i'm repeating myself here...very naggy)... but given a rather stable world.... what moves a currency is none other than IR...

anyways...i'm passing time here...until WC2010 starts...so, please take all that i write very suspiciously... last time my econs exam result- D