Using Forex Trading to protect your Aussie Dollar's value and sleep soundly.

Economic conditions favour the Aussie to eventually decline in value toward its average 'equilibrium' point of around 75 cents / US Dollar, perhaps by year's end.

So, what should an Australian investor considering buying property in Bali do ??

Let's say you want to buy a villa in Bali within the next 9 months. Your budget is AU$ 500.000. if you're satisfied with the purchasing power of the Aussie now (and you should be), you could cenvert 500.00 Aussie dollars into rupiah or Baht today at near record high exchange rates. Another alternative is to use a forex trading account to ensure that your $500.000 will retain today's purchasing power and buy you the same amount of property in the future, even if the Aussie dollars falls by 25% to 75 cents US. It's called 'hedging'.

A more traditional example of hedging is the strawberry farmer at planting time. Strawberry is at $5/bushel. He expects to harvest 100.000 bushels. he hedges the value of his as yet unplanted crop using futures contracts to short the strawberry market. He sells 100.00 bushels of strawberry using futures contracts. If strawberry drops $3 on each of 100.000 bushels, so his futures account makes a profit of abaut $300.000, offsetting the $300.000 drop in his crop's value. No sleepless nights.

In much the same way, a property buyer can rest easy and be assured his $500.00 will retain roughly today's buying power ( in $US) at any point in the future by using forex trading to sort the market.

Properly done, if the Aussie falls 10 cents (about 10%)  his forex trading account should show a profit about $50.000. If it falls 20 cents (about 20% ), he should profit aproximately $100.000. This offsets the $100.000 loss in purchasing power of his original $500.000. However, if the Aussie strengthnes 20%, the increased purchasing power of his cash is offset by a $100.000 loss in his forex account. Either way he is assured of having approximately today's Aussie dollar purchasing power at any point in the future (minus commisions, fees, taxes, etc). Again, no sleepless night.

A properly managed forex account funded with 50.000 to 100.000 Aussie dollars can prtect your half-million Aussie  dollars from a 20% fall in the Ausie, by bringing you back a net profit of $100.000 should the Ausie dollar fall. Make you consult your broker's advice on hedging before trying.

And remember, as always : " What goes up like a rocket comes down like a rocket." Don't be greedy , bulls make money, bears make money, but pigs get slaughtered! Happy trading!