Hi all. Some of you may have heard about the dollar expected to fall to 50 cents by end of 2016. Although this is not the opinion of all and no one will ever know for sure, I tend to agree. I work in mining and do not see things improving.
Worried about my savings being worth less, I'm looking at ways of taking advantage of the falling dollar. Anyone looked into this? Holding US dollars or buying US property?
You seem to be confusing the value of your savings with the value of the Australian Dollar relative to other currencies.
Not really. Probably just didn't word it well. I suppose I should mention I wish to travel in the future and would like a balance of my savings in US Dollars some how.
Ah that makes more sense ;)
As to the how and the what of it I'm afraid I can't be much help for you. You could possibly consider short or medium term bonds of some kind if you're happy to shoulder the risk and not having cash available.
50c nah, if lucky we might see 60c the lowest soon, if not it is pretty much bottomed out already will bounce soon. 69c is already low enough. Forget all the economy craps that is making you think aud will hit 50c in the future.
The rate is probably not going to go down too much further.
At $1.10 it was overpriced, would have bought up USD then if I was looking to play currencies.
At 68 cents it could definitely go down further, but how much… vs at $1.10 short of the US totally crashing, it was basically a sure bet it was at least going to drop to 75 cents (which from memory is the 'true parity' based on the economic figures etc, though it's supply/demand based on course)
I would have liked to have hedged too, but I feel that it is a bit late now. I really don't think that the US economy is good either, and they have huge debt!
Its time to travel to australia. Wait. I'm already there! Saved the air ticket. Even better
Problem is that everyone else is doing the same, so domestic travel costs rise due to higher demand - screwed either way!!
And even eating out goes up as the waiters serve OS vistors because they will tip where we won't… the list goes on
Use your AUD to buy gold locally, as the AUD falls (against the USD), gold (relative to AUD) tends to rise (10.14% in the last 30 days for various reason), then sell the gold when you need AUD back as (AUD) cash. Factor in for buying/selling fees etc, but this can all be done without holding or transacting in foreign currency.
I started buying International shares in my Super portfolio some years ago when A$ went over 0.75 cents for the first time and kept doing that till it came back down. So effectively I was getting more shares per A$ because of it's worth. So for my case to make the most of it I need to pick the bottom of the Aussie dollar cycle and sell all that international portfolio. They say… TWI is a good indication of the real worth of A$.
(tldr at the bottom)
The problem with small scale hedging strategies is the retail spread kills any margin you might have through fortunate timing.
e.g. buying gold, buying foreign currency in advance of when you need it…
The only proper way for you to do this is , let's assume you intend to spend $3000 AUD on your USA holiday (including flights accom spending etc)
ok let's run the maths, this is all assuming you can accurately predict currency exchange rates (which is a ridiculous premise to go on, but let's pretend that you can)
September 2015 sell $3,000 AUD, buy $2,070 USD via a CFD broker or forex market maker
11 months later
August 2016 , let's assume currency is now $1 AUD to 52c USD
sell back $2070 USD, receive $3980 AUD
profit = $980 AUD
interest charges would be approx 3.75%+ (difference b/n USD and AUD of 1.75% + retail broker spread of 2.0% ) , so around $112
final profit = $868
which would cover the lost value that your falling AUD had (as you would be paying for your flights/accomodation in AUD and converting spending money to USD)
So in THEORY that would be the superior way to play that strategy (superior to exchanging cash at a Travelex or buying gold coins and reselling them)
but in practice -
You are relying on the idea that you can not only
1) correctly predict the DIRECTION of currency exchange rates but also
2) the TIMING of events…
if indeed this was true then you would be a unique specimen and should immediately start trading FX and become a millionaire overnight…
(Lots of people have tried this and I have yet to meet one person who can do sucessfully trade forex consistently and verifiably for profit)
tldr : you can't actually predict exchange rates so ultimately you're just gambling. If you feel comfortable gambling then what I describe is the financially smartest/safest approach to take.
nb. additional benefit of this strategy is that you are working on margin so you don't have to part with more than $300~ worth of cash from your account to run your hedge. And you can exit at any time, if the currency reaches your target or if you change your mind.
Correct - and if you rely on the popular press to give you the insider tips, you usually will find you have missed the boats
Hedge if you expect it.
Do you expect to exchange all your savings for foreign currency in the future or something? If not, then I would just keep a small portion of savings in foreign currency for travel or whatever.