Aussie Dollar Is In Strong Uptrend

G7 leaders and central bankers decided to short the Yen to avoid price appreciation. The idea is to help Japan by means of attempting to keep the Yen as inexpensive as is possible making sure that their own exports have a competitive cost benefit in the world markets.

What we do not hear about is exactly where that money received via short selling the Yen is going. It appears to be going into the Australian dollar. It is also entering Australian financial institutions where the annual yield is over 5%. The government is boosting rates so as to cool off their own red hot economy and combat inflation. Consequently interest rates are generally high when compared to most countries around the world.

The actual procedure of shorting the Yen after which taking the money and putting it to work in other countries is referred to as the Carry Trade. For quite some time the Japanese Carry Trade helped fuel expansion around the globe. In 2007 the Carry Trade started to loosen up because the Yen appreciated in value forcing margin calls and many short sellers to buy to cover their positions. As the Yen continued to go up, the Carry Trade ultimately reached an end.

At present, the Carry Trade definitely seems to be thriving once more because of the devastating earthquake that hit Japan in March of 2011.

But not only is the Aussie greenback appreciating in price versus most other currencies, it's doing almost a complete inverse of what the US dollar (USD) is. This suggests that investors are shorting the US dollar and purchasing the Australian dollar.

The Australian dollar (AUD) is no longer considered a unsafe asset. Modern Australia is known for a expanding economy with strict budgetary discipline. The country is known for a powerful mining sector that's making huge revenue owing to soaring commodity prices. In reality, the mining giant BHP Billiton (BHP) has just announced a $13 billion investment to expand their fossil fuel and iron ore operations throughout Australia, further spurring confidence about the nation's mining sector. This uptrend in the AUD is additionally getting helped by the fact that traditional safe-haven resources such as gold remain pricey.

Many Australian's have concerns regarding the real estate sector. In Australia, the buying price of houses has doubled over the last 11 years. The great point though is that as the government boosts rates of interest, house sales are falling fast. This failed to take place in the US since money grabbing corporations began fraudulently qualifying people for mortgages in order to counter the slowing housing market. It started to be extremely lucrative to qualify everybody for a mortgage loan, then package that loan up in a basket along with other mortgages and sell that basket to somebody else. As long as Australia's regulation continues to be strong and corporations are screened regarding compliance with whom they qualify for a loan, the housing sector should gradually cool-down when rates of interest go up.

When you look at the chart on AUD you can see that it's been on a massive upward move, soaring to new all-time highs against the US dollar. In truth, the AUD has gone up from the USD with regard to 9 out of the previous 11 months, generating an increase of more than 24% since June of 2010.

Speculators wanting to play the downtrend of the US dollar for profits may wish to think about going long the AUD in place of shorting the USD. An Aussie Dollar ETF is available called the CurrencyShares Australian Dollar Trust (FXA). I do not have a position in this ETF at the time of writing this article.