The Pound hit an 11 year low against the Aussie Dollar in February, going below 2.10 for the first time since 1997. The prospect of yet another interest hike from the RBA this week combined with the further softening of the UK economy has maintained the now familiar downward trend in the exchange rate.

There was considerable AUD strength across the board throughout February, as the Central Bank warned it may need to raise its interest rates further to ensure significant moderation in domestic demand. The RBA minutes revealed that they considered a 0.5% interest rate hike at its February meeting, before settling for a 0.25% increase, thus reinforcing prior expectations for a further rate hike in March.

The UK, on the other hand, cut their rates at the beginning of February in a decision that was backed by all 9 members of the committee, with one member even calling for a half a percent cut. The Bank of England is juggling rising inflation with a slow down in economic growth and slump in the housing market, and as such, faces a tricky predicament.


So is it all doom and gloom?

No! Granted, over the course of the last year the rates have dropped a considerable amount, but this has happened for a reason. The Australian economy is booming – the housing market has been soaring, unemployment is at a 33 year low, and foreign investment is rife. On the contrary, the UK economy is suffering. The Bank of England has cut their rates to prevent a housing slowdown akin to that in the US, and it seems everything you read in the papers is bad news! This is one of the main reasons that so many of you are leaving the UK and seeking the fantastic opportunities that Australia offers for both yourselves and your children.

Would you have decided to move to Aus if the rates had always been 2.10? Most probably, yes. The problem a lot of people now face is coming to terms with these new levels, seeing as when they started the process last year the rates were a lot higher. These were somewhat distorted by the Sub Prime issues in the US, but again you must ask yourselves why it is that you are moving? If it is purely the rates of exchange then the South African Rand at over 15 ZAR to the Pound offers a very attractive return, but does it offer the same lifestyle and job opportunities that Australia does?

For those of you moving over in the next few months, however, you obviously want to maximise the amount of Dollars that you take over to start your new life, and there are different options for you to consider. The key is to get a strategy that will best suit your situation; whether it is fixing a rate now for all of your funds, or adopting a hedging option to spread your risk a little by way of a market order or target rate. Some of you will be considering leaving your funds in the UK as you won’t need them immediately, but there is no guarantee the rates will improve. Another benefit of moving your funds across is that Australia’s interest rates are higher than they are in the UK, thus giving you a higher rate of return and complete peace of mind.

Whichever strategy you adopt, when you have moved your funds over, don’t look at the exchange rates again!! Save yourself the headache and sleepless nights – it can become a stressful habit and take up a lot of your time!!

I hope this helps, and if you have any quesiotns then feel free to PM me or call our migration team on +44 (0) 1753 859159. Alternativey email _migration@hifx.co.uk quoting Britsinbrisbane as a reference.

Good luck!


Richard, HiFX

 

Richard,

Thank you for the update. A friend of mine was discussing exchange rates and how much they have dropped recently, this led on to whether or not to hang on for a bit. His advice was that you can hang on and they can drop even more or they could go up. Basically how would I feel if they dropped rather than went up? Yes it would be annoying if they went up but it would be worse to make a loss. He also advised that once you've done the deed to not follow the rates and save yourself pointless heartache!

Also as you say, I'm not heading there because of the exchange rate but of what the country can offer my family.

Lou

 

We were so so lucky and exchanged at 2.50..Thank god we did as I was holding out for a better deal..For once Paul was right bless him...It was good for us and I am so glad I listened to Paul...
If it was me I would hang out and bring it out at a later date...But ya just never know I guess
Jo x

 

Same here ,2.45 for half of it ,2.50 the rest ,,if we moved today theres no way we would mortgage free,,just noticed its jumped to 2.20 though so i may bring the bit over ive still left there,,if i do you can almost guarantee it will be 2.30 next week,lol
Cal x

 

I'l wait for you to do yours then Cal! lol

 

thanks MATE!!LOL,,i looked the day after and it was down to 2.18 ,,defo not doing it for less than 2.20,,
Cal x

 

HI Guys, Hopefully be moving this year, fingers and everything else crossed lol

I know that we will still move anyway, but it would be really nice to see that exchange rate push it self back up again , as with the Australian housing market at the moment on the up, going to need the best exchange we can get. Mortgage free will not be an option for us!

x

 

Aussie Dollar Update

Hi All,

As requested by a number of Brits in Brisbane regulars here's a brief update on what's happening in the currency markets and for anyone in the UK enjoy the snow!

High & Low of the Month:
High: 2.2301 (on the 15/01/09)
Low: 2.0202 (on the 05/01/09)

Difference of cost on a £200k:
High: $446,020
Low: $404,040
So a difference of $41,980

The Australian Dollar closed 2008 on a high against the Pound, gaining some 10% over the course of last year as an attractive yield advantage and relatively robust economy kept the AUD well supported. However, this summary hides a wild year which saw gains in the AUD down to 2.03 in mid-year, given up, and then some, back up to 2.70 by October as Australian assets (commodities and mining stocks in particular) were dumped in the autumn fire sale by hedge funds, following the Lehman’s collapse. There was also a further clearing out of stale ‘carry trades’ during this time. Even more remarkable, was the swift recovery in the AUD and, coupled with renewed weakness in Sterling, a slump in GBP/AUD back to 2.05.

The Reserve Bank of Australia’s recent bold moves, slashing interest rates by a hefty 3.00% since September to 4.25% have been well received and the AUD remains one of the few currencies with a relative yield advantage.
In broad terms, GBP/AUD remains confined within a multi-week downward range since the peak in October at 2.70, with scope readable towards the psychological 2.0000 level next.

GBP/AUD jumped to a fresh one-month high last week as bleak Australian economic data and further worries surrounding the global financial sector spurred investors to sell risky assets such as stocks and higher-yielding currencies. The Aussie’s demise was further compounded after Australian employment fell by less than expected in December, but a steep drop in full-time positions and a rise in the jobless rate heralded further weakness ahead, reinforcing the case for more interest rate cuts. The government report showed a net 1,200 jobs were lost over December, but firms cut full-time employment by a steep 43,900, the biggest drop in more than five years while the unemployment rate ticked up to 4.5% from 4.4% in November.

Although GBP/AUD has rallied impressively in recent weeks, Sterling is not yet out of the woods and although further commodity price falls would damage the Aussie Dollar, we expect resistance around 2.30 – 2.32 to restrict further advances. However, in the absence of a more extended period of consolidation, it is difficult to imagine any emergent Sterling strength being sustained much thereafter.

GBP/AUD slumped sharply at the end of the month, as UK banking shares dived and Britain’s latest bank rescue plan did little to assure investors and raised concerns about the government’s ability to service its ballooning debt. Meanwhile, on the data front Australia’s export prices soared by a record last quarter, helping outstrip the biggest rise in import costs in 22 years and delivering a last hurrah to trade incomes ahead of a likely severe downturn this year. The government showed the price of Australia’s export prices jumped 15.9%q/q in the fourth quarter, leaving prices 54.9% higher for the year and posting the biggest increase since the series began in 1974. Import prices rose 10.8% in the quarter, the largest rise since 1986, leaving them up 22.1%y/y.

We suggest, the initial Sterling rally at the start of January was not strong or sustained enough to confirm a change in the overwhelming sentiment against the Pound.

Central bank rates:
Australia: 4.25%
UK: (MPC): 1.50%
US (FED): 0.00 – 0.25%

Going forward most industry analysts expect continued volatility. No surprises there!

Whilst FX isn't the most thrilling of subjects, the sooner you begin to think about your money transfers, the more likely are to make your money go as far as you do.

Best Regards

HiFX