SendFX Editorial

Strong Aussie Dollar buoys importers and expats sending money home

By Dale Streten – Head of Corporate Partnerships, Send

MARKET COMMENTARY

The AUD has demonstrated considerable strength and traded solidly in an ascending channel. Currency exchange specialist Send has seen increased activity with Australians repatriating money to locations such as New Zealand, the US, and UK. Its data indicates this is driven by expats returning home (many as a result of the COVID-19 pandemic), offshore property purchases (from buyers taking advantage of slightly reduced property prices), and those providing financial assistance to family members.

To give an example of the significant differences over a short period of time, an Australian sending $100,000 worth of AUD to NZD received approximately 8800 more NZD at the start of September when compared to mid-March. Likewise, an Australian importer paying an invoice for USD100,000 would have been a whopping A$38,000 better off in the same timeframe.

AUD/USD

The AUD is likely to be in a period of consolidation, and where .7000 was a prior milestone resistance level, this may transform into a key support level.

The main driver has been commodity prices, with iron ore holding an average of above USD100 per tonne since the start of June,

and gold up over 30% since its lows in March. Another factor is the significant fiscal leverage at the government’s disposal, given Australia’s relatively solid financial position, with one example being the extension of the wage subsidy programmes in early August. Additionally, the Reserve Bank has effectively endorsed the rally in the AUD — in August’s minutes, the RBA noted that the AUD’s strength is broadly in line with its fundamentals.

Combined with the statement that negative rates in Australia were “extraordinarily unlikely”, this all points to the likelihood of the RBA being in a holding pattern over the coming quarters and the AUD hanging on to the recent gains.Other factors on the horizon are the possible changes to the Federal Reserve’s approach and messaging and, of course, the looming US election. Most notably, any Covid-19 vaccine announcement would boost equity markets and potentially push the USD forward.

AUD/GBP

The GBP remains vulnerable to any large-scale Covid-19 outbreak in the UK and also in particular to Brexit news developments, with currency softness if the pessimism over a deal continues to grow. The AUD fell below .4800 in March, however is now solid around .5500 (previously not at that point since Oct 19).

AUD/NZD

The AUD is at two-year highs on strong volumes. The rate has also stabilised above the five-year average and Send has seen high transaction levels of funds being sent to New Zealand.

SUMMARY

While the current global economic environment is volatile and subject to further Covid-19-related shock, the AUD remains attractive due to Australia’s relatively solid economic situation.

As always, the market maxim of the Aussie dollar going “up by the stairs and down by the elevator” ensures that a careful watch is required for downside risk. Send assists many FBAA brokers and their clients with exchange rate monitoring, so if you have any requirements or queries please contact us at broker@sendfx.com.au

Similarly, if you have any clients selling their Australian property and sending monies overseas, this is an opportunity for you to refer clients to Send and potentially earn commission on these payments.

DISCLAIMER

Details correct at the time of writing. The information provide above is provided as general information only and does not constitute advice of any nature. FBAA and Send do not warranty the accuracy of the information provided and you should seek your own advice in relation to any products mentioned.

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