aussie $ at 59.77!!!!!!!!!!!!, page-5

re: aussie $ at 59.77!!!!!!!!!!!! now 59.46! Hi Snuff,
Cashing out profits, etc.

G'day Nickoo,
On this, I agree, but relatively speaking, the Aussie has appreciated 20% in value since early 2002 and, therefore, needs to come back heavily in value (ie: nearer to 52c) in order to make any real export difference.

At the same time, any prolonged Middle East crisis will keep oil at its currently high levels. An AU$ returning to the low 50s, therefore, will create a more expensive oil price outlook (in AU$ terms).

If sustained for a period of greater than 3 months, this could translate into an increase in core CPI of 100 -150 basis points (thereby taking headline inflation above 4% and clearly into territory where the RBA would need to consider an interest rate tightening).

To, therefore, benefit materially from an export perspective, the AU$ must hit 52c. But countering this will be the inflationary impact of a lower dollar. I, therefore, agree, a lower dollar is better, but until the Middle East subsides, I do not want to see the dollar fall below 55c.