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Buy Australian Dollars

Jul. 10, 2019 10:07 AM ETFXA6 Comments


  • The Australian dollar is undervalued.
  • The Australian economy is influenced by exports.
  • The RBA will probably lower rates to offset falling prices for housing as the bubble has burst.
  • Wine is an interesting investment opportunity.

In an earlier article about dollar depreciation it was promised that there would be some articles about where to invest in order to anticipate a weaker US dollar. The first place that one should look is Australia. The country is quite stable and has not had a recession for several decades. The Australian dollar at the present time is undervalued. See the chart.

This five-year chart shows that the Aussie dollar has fallen from 0.90 to just under 0.70 in the last five years. That is an indication that the Aussie dollar has become cheaper to buy for American investors. It is unlikely that it is going to fall much further. Fifteen years ago the Aussie dollar was practically par with the Swiss franc. This gives an idea of how much the Australian currency has depreciated. Of course there has been a lot of inflation in Australia, especially in housing, but it should be clear that now is a good time to shift some US dollars to investments in Australia.

One aspect of the Australian economy is that exports of iron ore and coal help to influence the exchange rate. China is the main customer as Australian coal is of much better quality than the brown coal mined in China. As for iron ore, China`s need for massive amounts of steel guarantee that Australian iron ore miners will have a market where they can unload large amounts of iron ore.

The forecast of lower amounts of exports is compensated by higher prices for iron ore. The Chinese demand for iron ore will remain high. This will help to keep the Australian dollar stable.

Another aspect of the Australian economy is that the RBA (Royal Bank of Australia) is expected to lower interest rates slightly to offset the lower prices in

This article was written by

B.A., M.A., University of Pennsylvania,; M.A., (Oxon.); Ph.D. Princeton University Currently CEO of WWS Swiss Financial Consulting SA

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Data from third-party sources may have been used in the preparation of this material and WWS Swiss Financial Consulting SA (WWW SFC SA) has not independently verified, validated or audited such data. WWS SFC SA accepts no liability whatsoever for any loss arising from use of this information, and reliance upon the comments, opinions and analyses in the material is at the sole discretion of the user. Please consult your own professional adviser before taking investment decisions. The comments, opinions and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. Because market and economic conditions are subject to rapid change, comments, opinions and analyses are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment or strategy. All investments involve risk, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in an investment portfolio adjust to a rise in interest rates, the value of the portfolio may decline. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments.

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