{"id":21310,"date":"2011-05-25T10:59:13","date_gmt":"2011-05-25T14:59:13","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=21310"},"modified":"2011-05-25T10:59:13","modified_gmt":"2011-05-25T14:59:13","slug":"why-americas-problems-could-be-bad-news-for-the-aussie-dollar","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2011\/05\/25\/why-americas-problems-could-be-bad-news-for-the-aussie-dollar\/","title":{"rendered":"Why America\u2019s Problems Could be Bad News for the Aussie Dollar"},"content":{"rendered":"

Why America\u2019s Problems Could be Bad News for the Aussie Dollar<\/strong><\/p>\n

\u201cCalifornia unemployment edges below 12%\u201d<\/em><\/p>\n

In a moment, we\u2019ll explain why that headline from the Los Angeles Times<\/em> points to more trouble for the U.S. economy, but good news for the U.S. dollar\u2026<\/p>\n

With an unemployment number of 12%, you\u2019d think most folks would be happy to take any job they can.<\/p>\n

But not the four picketers we ran into outside our hotel in San Francisco.<\/p>\n

They weren\u2019t the only ones protesting.\u00a0 Two former employees of CVS Pharmacy picketed the store on Market Street.<\/p>\n

And further along two picketers handed out leaflets outside the entrance to Bristol Farms grocery store at Westfield\u2019s San Francisco Centre.<\/p>\n

A downward spiral<\/strong><\/p>\n

These events \u2013 while small \u2013 help confirm our view of the U.S. economy: it\u2019s on a downward spiral.<\/p>\n

Don\u2019t get us wrong.\u00a0 We\u2019re a fan of the U.S.A.\u00a0 We\u2019re sure throughout history there\u2019s no better example of the downtrodden being granted the liberty and opportunity to succeed.<\/p>\n

That\u2019s what happens when individuals are free to make their own decisions and mistakes.<\/p>\n

The only problem is the country is suffocating from Progressives and statists.<\/p>\n

Those who want the government to do more, not less.<\/p>\n

They want more money going to government.\u00a0 And less in the pockets of individuals and private enterprise.<\/p>\n

That\u2019s what makes us sceptical about the so-called U.S. economic recovery.\u00a0 We don\u2019t believe trillion dollar debts and deficits add up to a recovering economy.<\/p>\n

In that case, you\u2019d expect us to sell the U.S. dollar.<\/p>\n

Wrong.<\/p>\n

In fact, we believe you should do the opposite\u2026<\/p>\n

Why you should buy the U.S. dollar<\/strong><\/p>\n

Like it or not, the U.S. dollar is still the global reserve currency.<\/p>\n

And with the Euro and Japanese Yen on the nose right now, we\u2019re not convinced investors will abandon the Greenback yet.<\/p>\n

Don\u2019t forget, the U.S. economy still accounts for one-quarter of global Gross Domestic Product (GDP).\u00a0 That\u2019s on a par with U.S. economic share in the 1980s and 1990s.<\/p>\n

That all suggests when the proverbial hits the fan again, you could see another knee-jerk rally of U.S. dollar buying.\u00a0 It\u2019s hard to see big investors breaking old habits.<\/p>\n

Not because America has the best economy.\u00a0 But simply because investors are used to buying the dollar.\u00a0 Despite all that\u2019s happened, most investors still see the U.S. dollar as a safe investment.<\/p>\n

Emerging nation currencies such as China and Brazil still rely on the U.S.<\/p>\n

And when markets take another hit, we\u2019re not convinced big investors in Europe will hold most of their cash in Chinese Yuan or Brazilian Reals.<\/p>\n

We\u2019re not the only ones to think this.<\/p>\n

The fact the Aussie dollar has failed to go tells you investors are cautious about further gains.\u00a0 That could mean the Aussie\u2019s glory run is over.<\/p>\n

And the same goes for other currencies.\u00a0 Here\u2019s the U.S. dollar index chart:<\/p>\n

\"One-Year<\/a><\/p>\n

The U.S. dollar has bounced after plunging from 88 to 73 in less than a year\u2026 even if it\u2019s just a small bounce.<\/p>\n

Make no mistake, it could have a big impact on your investments if the Aussie dollar drops and the U.S. dollar gains.<\/p>\n

While it\u2019s not something we\u2019ve addressed in Australian Small-Cap Investigator<\/em>, our old pal, Australian Wealth Gameplan<\/a><\/em> editor, Dan Denning has.<\/p>\n

And that makes sense to us.<\/p>\n

The fact is, Aussie investors have a lot of money invested in commodities stocks. \u00a0Commodity prices have a big impact on the value of the Aussie dollar.\u00a0 So any swift and long-term decline in industrial commodity prices \u2013 iron ore, copper, etc. \u2013 spells trouble for the Aussie dollar and your investments.<\/p>\n

We can\u2019t tell you exactly how Dan has suggested investors reduce their Aussie dollar exposure \u2013 that\u2019s for subscribers only.<\/p>\n

But we can say that with the Aussie dollar near a record high, it makes sense to manage your exposure to the commodity-focused Aussie.<\/p>\n

Cheers.<\/p>\n

Kris Sayce
\n<\/strong>Money Morning Australia<\/p>\n

P.S. <\/strong>The Aussie dollar is still trading near a multi-decade high.\u00a0 The Aussie dollar is one of the most popularly traded currencies on the market, due to the commodities exposure.\u00a0 That means it\u2019s possible the Aussie dollar is in the middle of a huge currency price bubble.\u00a0 And when it re-values lower it will have a big impact on Aussie share prices.\u00a0 In our opinion, that\u2019s something you should prepare for.\u00a0 To check out what Dan Denning has told his Australian Wealth Gameplan<\/em> readers, click here\u2026<\/a><\/p>\n

\"\"<\/a> \"\"<\/a> \"\"<\/a><\/div>\n

\"\"
\nWhy America\u2019s Problems Could be Bad News for the Aussie Dollar <\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

The fact is, Aussie investors have a lot of money invested in commodities stocks. Commodity prices have a big impact on the value of the Aussie dollar. So any swift and long-term decline in industrial commodity prices \u2013 iron ore, copper, etc. \u2013 spells trouble for the Aussie dollar and your investments.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-21310","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/21310","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=21310"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/21310\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=21310"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=21310"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=21310"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}