AustCitizen
The currency trading environment is a very cyclic thing. One has to be very wary of reports or articles they may read or see especially on channels like CNBC, Bloomberg etc. The people interviewed on these channels generally have a vested interest in the positions they take. They will usually harp on about the US government’s foreign debt etc. While it isn’t good it should be looked at in the context of the size of the US economy which still is about ten times the size of the Chinese and Indian economies. If we want to start looking at debt levels then one should look at total debt levels in the economy i.e. private and public, and in this respect most of the high yielding economies aren’t much better than the US. Unlike when I was a currency trader many moons ago for one of the four major banks in Aus, Hedge funds are now dominant players and have a major impact on currency valuations. They predominantly look for currencies that have the highest yields. Currencies such as the NZD, AUD, GBP, and the EURO. Like all markets though they can overheat and there are signs that maybe things in the not too distant future may unravel. There are already serious signs of cracks appearing in the NZ economy caused by the high NZD. While I think that the AUD may and probably will go higher, the longer it stays at these levels the more damage it will do to the Aus economy, especially exporters who are the main driving engine for the buoyant Aus economy at the moment. In the longer term the AUD will probably settle in the mid 70’s to the USD.
Regarding energy stocks? Golden rule number one is to buy when they are low and sell when they are high. Yes they may go higher but I would be very wary at this point in the economic cycle to overexposing myself to this sector. US$100 per barrel for oil isn’t sustainable in today’s economic environment and will most definitely lead to a world wide recession.