Macro investing: Return of the Pacific peso

The recent dramatic fall in the Australian dollar raises questions about how low it might go. Macro Business takes a stab at an answer, but it ain’t pretty.

Run on the least ugly rule of thumb, currency markets are notoriously difficult to pick; a game of constant comparison that drives currency pairs to extremes. Take our own currency as an example.

In April 2001, it traded as low as 0.4775 against the US dollar and in July 2011 as high as 1.1080. It has averaged 1.0331 since the start of 2010, compared with the long term post float average of 0.7560.

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