how does the exchange rate affect the asx?

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    for some reason, a DOW vs ASX thread was just deleted

    anyway, i hope starting this new thread is OK

    i start with some high school analysis:

    compare a DOW vs ASX chart to the chart below

    the $AUS first spikes around 1 Nov 10, which is when the DOW start to pull away from the ASX

    this is when foreign investors start to sell their ASX shares

    for example, an American buys BHP for A$40 when the exchange rate is 80 cents for cost of US$32 and then sells BHP at A$40 when exchange rate is $1.05. Although the BHP share price has not changed, they make a profit of 31%

    also, due to high exchange rate, the BHP earnings, in $AUS, will be lower. in other words, a high $AUS make Australian exports more expensive

    if iron ore is US$150 per tonne, when A$ is 80 cents, the Aussie exporter receives A$187 for each tonne sold. when A$ is $1.08, the Aussie exporter receives A$139 for each tonne.

    this makes Aussie companies that export from Australia less attractive

    i am in not way an expert and just recalling my high school economics

    regards





    http://au.finance.yahoo.com/q/bc?s=AUDUSD=X&t=2y&l=on&z=l&q=l&c=
 
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