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Australian Dollar special report

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Managing real business currency exposures

Wed, Oct 29 2008, 08:47 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.

AUD .6410
A very strong rally, and while encouraging we still have to be a little cautious. Our exporters are hedged 40% at very good levels, but we need importers to take a some advantage of this rally just in case it turns out to be a fading event.
Above .6560 should further confirm the absolute low has been seen. Our view remains a massive US dollar collapse, AUD rally at some point, but we still need to be a little watchful for another last AUD sell off as a prelude to that US dollar implosion.
On the day the rally looks a touch tired in the .6530 .6250 range, .6470 .6330 on the narrow, minor support also at .6360. Under .6360 would suggest further caution that this rally was a momentary spike only.


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