Australian Dollar Near 25-Year High
The Australian dollar reached a 25-year high vs. the U.S. dollar, and I think the outlook remains solid for the currency.
The nation’s central bank seems likely to keep interest rates steady at 7.25 percent (a 12-year high), which has supported the Aussie dollar. It’s been one of the best performing global currencies this year and an attractive market for investors seeking higher yields. In contrast, the U.S. dollar has seen prolonged weakness as our Federal Reserve cut interest rates to 2 percent. The U.S. economy is still underwater, and Australia looks better in contrast. The country has an extremely low unemployment rate (near zero) and their economy has been driven by gains in commodities. They are a major producer of wheat, and have substantial gold reserves too.
I recommend buying September Australian dollar futures at 97.01 U.S. cents. The market is currently down after four days of gains, trading at 96.93, so you should have a good opportunity to get this trade off. I also recommend using options as a hedge, as global market have been volatile. Consider buying the August 97 puts, which helps define your risk. The options expire August 8, 2008.
Feel free to call me with any questions you have about this strategy or others to suit your particular account size and risk tolerance. Ask about our special half-off commissions offer for new clients.
Phillip Streible is a Senior Market Strategist with Lind Plus. He can be reached at 800-803-8037 or via email at pstreible@lind-waldock.com.
Past performance is not necessarily indicative of future trading results. Trading advice is based on information taken from trade and statistical services and other sources which Lind-Waldock believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder.
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