Avoid Currency Controls & keeping currency gains from damaging their economies

At a time when nations from Japan to Brazil are struggling to maintain foreign exchange earnings of damaging their economies, Reserve Bank of Australia governor Glenn Stevens welcomes a stronger exchange rate.

Australia dollar has advanced 19 percent since late June, most of the 16 major currencies followed by data  reaching parity with U.S. dollar last month for the first time since July 1982. The rally may help curb inflation, sales of iron ore and coal to China bring less local dollars. When Stevens surprised investors by raising interest rates on 2 November, said in a statement that the increase in the money "will help, at the margin, in the containment of inflation pressure."

Stevens is allowing gains, while Japan sold yen for the first time since 2004, and Brazil, South Korea and Taiwan to obstruct foreign investors. World leaders from countries like Japan, Brazil and China have said that the U.S. is degrading its currency through the Federal Reserve's plan to print dollars so you can buy $ 600 billion of Treasuries.

"The Australian dollar is between what we call the world of new shelters," said Jonathan Lewis, the founding director of New York, Samson Capital Advisors LLC, which manages $ 6,900,000,000 and specializes in bonds and currencies. The Australian called "float more freely than others," he said. "Even the free-floating currencies should have an asterisk next to their names because of central bank interventions."

Buying Bonds

After the meetings in Seoul last week, leaders of the Group of 20 countries agreed to seek gradual changes in currency values, providing some cover countries to adopt capital controls to limit exchange rate movements.

The outlook for the Australian has taken some of the world's largest investors in bonds to build the nation's debt, although Stevens said more rate hikes may come.

Lewis has twice the percentage of Australian dollars as contained in its benchmark index used to measure fund performance. Kokusai Global Sovereign Open, the biggest Asian bond fund, increased its investment in Australia to a record 15 percent of assets this year.

"The Australian economy is healthy," said Masataka Horii, one of four managers, 37.5 billion U.S. dollars of funds in the Kokusai Global Sovereign Tokyo. "The Reserve Bank of Australia will increase its policy rate and the currency will appreciate."

"Aggressive" Bank

Samsung Investment Trust Management Co., the largest private investor in South Korea fixed-income next year is starting a fund to invest in the debt of Australia.

"Australia has one of the most aggressive central banks in the world," said Sungjin Park, who oversees the equivalent of 55.9 billion U.S. dollars as head of fixed income at Samsung in Seoul. "Many fund managers in Asia, including China and Japan, Australia's bonds are more attractive" than any other sovereign debt in the region, he said.

The government's November 10 auction of debt maturing in July 2022 attracted bids for 4.55 times the amount of available titles, the most since the country expanded its lending program in 2009.

The Aussie fell 0.1 percent today to 98.36 cents U.S. as of 8:58 am in London, from this year low of 80.67 cents in May. It rose as high as $ 1.0183 on 5 November.

Beating forecasts

Analysts predicted earnings. The Australian ended the third quarter to 96.71 U.S. cents, while the median estimate of economists and strategists surveyed was 88. They are now catching up with the rally, raising its estimate in mid 2011 to 99 cents U.S. 88 two months ago.

The progress of the Australian dollar has become the world's most expensive currency based on purchasing power parity, a measure of cost of goods relative to other countries. The indicator shows the Aussie is trading at a premium of 30 percent, according to data compiled

"It's very overrated and is unlikely to remain so for a considerable period," said Lee Hardman, currency strategist in London at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan's largest publicly traded bank.

The unemployment rate in Australia of 5.4 percent compared with 9.6 percent in the U.S. and 10.1 percent in the euro area. The IMF predicts that Australia's economy will expand 3.5 percent next year from 3 percent in 2010 compared to 2.3 percent in the U.S. and 1.5 percent in Europe.

China's growth

The figure will be 9.6 percent for China, the IMF forecasts, fueling demand for resources from Australia, the world's largest exporter of iron ore and coal. China's iron imports averaged 51.5 million tons a month this year and last year, compared with 37 million tonnes per month in 2008.

Shipments of products from China are the promotion of employment. BG Group Plc, the third largest UK oil and gas producer, said Oct. 31 it will build a business by 15 billion dollars of liquefied natural gas in Queensland. The project will create 5,000 jobs, reading, the British company said.

Australia's employers added 29,700 workers in October from the previous month, the statistics bureau reported on 11 November. News survey of economists projected 20,000.

Recruitment threatens to increase inflation, the central bank aims to maintain a range of 2 to 3 percent. Consumer prices rose 2.8 percent in the third quarter last year, compared with 3.1 percent in April-June period, the government said Oct. 27.

The rate increase

The Reserve Bank of Australia, known as the RBA has raised the interbank lending rate seven times a day since October 2009. The measure was increased by a quarter point to 4.75 percent on Nov. 2. In his speech that day, Stevens said the growth outlook, saying he hoped that "the strongest private spending over the next couple of years."

benchmark rates in the U.S. and Japan are near zero. The central banks of both countries are also buying government bonds, a strategy known as quantitative easing that pumps money into the economy. Japan sells yen on September 15 rally to stop the coin to a maximum of 15 years.

Japanese Prime Minister Naoto Kan, said earlier this month the U.S. is implementing a "weak dollar policy" and said the Chinese central bank adviser Xia Bin amounts U.S. Print quantitative easing "uncontrolled" money. President-elect of Brazil, Dilma Rousseff, said last week other countries are driving the cost of U.S. debasing its currency.

Stevens tolerance of a stronger dollar in contrast to local officials from other nations who are concerned about the profits to reduce demand for exports and investors seeking higher yields lead to flood markets with money.

Exchange controls

Brazilian President Luiz Inacio Lula da Silva tripled a tax on purchases of foreign bonds last month to 6 percent. South Korea may revive a tax of 14 percent of the bonds held by international investors in January, ruling party lawmaker Song Sik Kim said in an interview in Seoul on November 9.

Taiwan, said Nov. 9 that would limit foreign investment in government bonds and money market products to a maximum of 30 percent of the value of foreign fund portfolio is.

Currency gains help Stevens fresh growth, said Ken Leech, chief investment strategist committee overall Western Asset Management Co., the unit of Legg Mason Inc. 's bond.

"We do not believe that they will intervene," said Leech, who helps oversee $ 482,200,000,000 in Pasadena, California, Western Asset, November 02 at a seminar in Singapore.

The Australian economy is attractive enough to draw Franklin Templeton Investments, as the company's San Mateo, California, the second largest holder of the debt of the nation behind Kokusai, according to our data

"The fundamentals are still better in Australia than in the U.S., despite the recent appreciation of the currency should be allowed to remain strong," said David Zahn, who helps oversee Franklin 664.3 billion U.S. dollars in assets such as a fund manager based in London higher in the fixed income group. "We have a responsibility to raise rates to keep the economy from overheating and keep inflation under control," he said in an e-mail. "The rise of the currency does something of this for the RBA."