Well it looks like everyone is starting to catch on to the Aussie trades I have been trumpeting for weeks. Here’s a good take from Bloomberg about all of the reasons why this trade makes so much sense. Why do I bring this up?
Well, tommorrow its expected that Reserve Bank of Australia (RBA) is going to raise rates another 25 basis points to 3.5% on its benchmark rate. While this is good news for those who hold Australian dollars, my contrarian nature tells me that it may be time to lighten the load a bit.
Generally speaking, when everyone else wants to be a buyer, I want to be a seller. And vice-versa. So I’ll be keeping an eye on the Aussie pairs. While we’ve gone over the risk trade ad nauseam, because the forex market is forward-looking (most are), this rate hike may very well be priced in.
Also to note is that while Australia appears to be exiting the recession, other countries are sure to follow suit and may begin raising rates as well. So there are alot of factors going on here which could affect this currency.
So its when things appear to be rosiest is when I tend to exercise caution. Will be interesting to see how this plays out!
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