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Australian Dollar special report

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Managing real business currency exposures

Mon, Oct 27 2008, 08:53 GMT
by Clifford Bennett

FxMax


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Real business exposures need to be managed in a very real way in current markets.

Option spreads are wider, and volatility pricing is likely to remain high for some time. This daily report will contain a brief comment on the AUD/USD, but significantly we will carry out an on-going theoretical management of both export and import exposures, as well as capital risk management such as investments overseas, or local investments undertaken by offshore investors.

  • The first objective is defence against adverse currency movements.

  • The second objective is to maximise favourable trending periods.

The starting point is AUD .6225. We will provide buying and selling signals on the basis that a full one year of projected export/import flows are being managed, and in the case of investments, 100% of the value of the investment is being managed.

So let us begin, The Reserve Bank of Australia has intervened in the Australian dollar market and while this will offer some momentary relief, the big picture will remain dominated by US dollar movement. (Please see copy of earlier e-mail re the USD on the following page.)Therefore RBA intervention cannot as yet be viewed as the turning point in the AUD sell off. The immediate price action suggests a move above .6360 would be needed to signal a lasting low may have been seen. There is good resistance in the .6250 to .6275 area, which is where we will see some of the traders who went long with RBA buying, start to take their profits. Above .6275 would be early warning of the low being in place, but tend to think .6275 or .6360 may contain for fresh lows.


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