Hi SurandyMy feeling is the surge on Friday is basically 'macro'...

Hi Surandy

My feeling is the surge on Friday is basically 'macro' related.

I think there were two interconnected factors behind the run into SHV shares at the close of last week.

Firstly, on the 10th and the 11th of August, there was a steep fall in the Australian dollar against the US dollar:

That leaves the AUD sitting at around 0.65, which historically, is a very low level compared to the US dollar.

Within the past decade, there were only two occasions in which the Australian dollar fell lower than this against the US dollar: during the 'covid crash' of 2020 and during the correction late last year, where it fell just below 0.63c to the USD.

Of course, both those falls were temporary.

At any cost, with almonds being priced in US dollars, Australian-grown almonds would be uber-competitive at the moment.

A second macro factor, and one which is certainly intertwined with the above, has been in the headlines over the past couple of days: On Friday, Phil Lowe made his final appearance before the House Economics Committee in Canberra.

The above meeting took place between 9:30 and 12:30.

Shortly after the meeting started, the Select share price opened at $4.17, but by the time the meeting concluded at 12:30, the share price had pretty much done its dash for the day: by the time the meeting ended, the share price was sitting at $4.5, only a touch below the closing price at $4.55.

In other words, it is hard not to suspect that something that was said in that meeting was a significant driver behind the rise in the share price that day.

I think what the buyers were latching onto here was the comments from Phil Lowe that 'the worst is over' for interest rate rises.

Given the relationship between the RBA cash rate and the Australian dollar, the expectation that interest rates are at, or near, a peak might remove a key support peg for the local dollar, and thus it would seem that Lowe's comments might have served as a 'green light' for some buyers who had previously been sitting on the sidelines.

On the dollar front, there might also be something else in the background feeding into the weakness.

Last Wednesday, one prominent investment strategist mooted a forecast that the Australian dollar would fall to the 40s relative to the USD in 2024, predicated on a severe economic slump in China.

The forecast has garnered a fair bit of media interest, and so it is possible that this might have also helped fuel some of the enthusiasm for the SHV shares on Friday.

Of course, if the Australian dollar was to fall below the 0.50 mark, that would be fantastic news for Select Harvets.

I, for one, remain sceptical. I wouldn't go so far as to say that it couldn't happen, of course. But I do feel that if the local dollar were to dip below 0.50 cents to the USD, I think there is good reason to suspect that it wouldn't stay at those depressed levels for very long.