Jan 24, 2012

AUD a New Safe Heaven? Bad Joke

As WhatIf has mentioned earlier, the fundamentals are not looking good for Australia. All the non-resource sectors appear to be stagnating, to a large extent hurt by the strong currency. At the same time material exports, while very strong at the moment, are mostly going to China. And China is slowing down.

There has been some talk in the market / media of the AUD becoming a new safe heaven as one of the very few remaining AAA economies. It's a nice story but clearly not true - a minor hiccup in equities still sends Aud/Usd tumbling. As it should, seeing as Australia's economy is to a large extent just a leveraged, liquid bet on China.

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