The case for commodity currencies. Central banks adding CAD + AUD

Kassz007 · Jun 22, 2010

http://www.bloomberg.com/news/2010-...erve-currency-status-with-loonie-gaining.html

Central banks diversifying out of USD, EUR, JPY, and into CAD and AUD. As the article mentions, CAD and AUD aren't liquid enough to become a major part of reserves, but the trend at the moment looks like central banks are buying up some of these currencies.

Short EUR/CAD, EUR/AUD could continue to make you money.

Debaser82 · Jun 22, 2010

Both the AUD and the CAD have gone up 30% or so against the Euro in 1 year or so...

Jeez, how much higher can they go?

Are all currencies in the world going to parrity?

Kassz007 · Jun 22, 2010

Quote from Debaser82:

Both the AUD and the CAD have gone up 30% or so against the Euro in 1 year or so...

Jeez, how much higher can they go?

Are all currencies in the world going to parrity?

I have no crystal ball, I only see trends. How much higher can they go? I don't know. Why can't they go up another 20%?

Ivanovich · Jun 22, 2010

The commodity currencies will be the first to shit the bed if (when, actually) the world visits "double dip" territory.

Being long those two currencies (AUD especially) will get your account hit by a nuclear warhead, in much the same way it occurred in Q4 2008.

As an added note, the Central Banks who are now "diversifying" into these currencies are noted indicators of tops/bottoms and horrible at successfully re-allocating their mixes.

ASusilovic · Jun 22, 2010

Quote from Ivanovich:

...As an added note, the Central Banks who are now "diversifying" into these currencies are noted indicators of tops/bottoms and horrible at successfully re-allocating their mixes.

Hum...Russian central bank, too ?

rcaldwell · Jun 22, 2010

Quote from Ivanovich:

The commodity currencies will be the first to shit the bed if (when, actually) the world visits "double dip" territory.

Being long those two currencies (AUD especially) will get your account hit by a nuclear warhead, in much the same way it occurred in Q4 2008.

As an added note, the Central Banks who are now "diversifying" into these currencies are noted indicators of tops/bottoms and horrible at successfully re-allocating their mixes.

All are "at risk" in this environment of currency turmoil including the dollar. Who says it is a safe haven anymore with multiple states and municipalities headed for bankruptcy.

ralph00 · Jun 22, 2010

Always look to fade the central banks. I've been itching to short AUD vs the $ for some timea now, and a story like that makes me think I'm on the right track.

Ivanovich · Jun 22, 2010

Quote from ASusilovic:

Hum...Russian central bank, too ?

Them most of all!

fullblotter · Jun 22, 2010

Quote from Ivanovich:

The commodity currencies will be the first to shit the bed if (when, actually) the world visits "double dip" territory.

Being long those two currencies (AUD especially) will get your account hit by a nuclear warhead, in much the same way it occurred in Q4 2008.

As an added note, the Central Banks who are now "diversifying" into these currencies are noted indicators of tops/bottoms and horrible at successfully re-allocating their mixes.

Perfectly stated.

Ghost of Cutten · Jun 28, 2010

Quote from ralph00:

Always look to fade the central banks. I've been itching to short AUD vs the $ for some timea now, and a story like that makes me think I'm on the right track.

Bad times to fade central banks:

Euro intervention around 0.85 to the dollar.
Hong Kong stock market intervention in 1998.
BoJ Yen purchases in 1998
Plaza accord

All marked pretty much the exact reversal of huge multi-year moves, and led to gigantic gains if you followed the central bank interventions.

So, the "always fade central banks" rule is a poor one. Sometimes they are right, sometimes they are wrong. Personally I think they are wrong this time, but if so then it's because of the fundamental outlook for those 2 currencies and the world economy, not because some central banker buys them.