A Year Abroad, A 12% Swing Nobody Was Managing

THE PATTERN · THE AUD CORRIDOR

Good morning,

There is no single name in this one. There does not need to be.

Right now, more than thirty Australian coaches and well over a hundred players are working overseas. Every one of them is paid in a currency that is not the currency their life runs in back home.

For every $200,000 of overseas salary, a one cent move on USD/AUD is worth roughly $1,400 by the time it lands in an Australian account. A one percent move is worth closer to $2,850. Most people earning abroad have never had that number run for them.

Over the past twelve months, USD/AUD has traded as high as 1.565 and as low as 1.374. That is a 12.2 percent range, top to bottom. Convert the same overseas salary at each end of that range and the gap, in real Australian dollars, is substantial. Nobody signing an overseas contract gets to choose where in that range their pay happens to land.

That number is not a forecast. It already happened. Someone converting at the December high walked away with roughly 12 percent more in Australian dollars than someone converting at this September's low, for identical income, identical hours, identical job.

A company moving this much money across a border, for this many people, would have a written policy for it. Right now, this is well over a hundred separate people, each quietly managing it alone, or not managing it at all.

The Australian dollar fell to a four week low this week, even with the Reserve Bank still expected to raise rates, because a hawkish US Federal Reserve overshadowed it.

The Fed hiked 25 basis points on the 16th, taking its target range to 3.75 to 4.00 percent, with the updated projections pointing to one more move before year end. That is the story behind the numbers below. Someone converting a US salary home this week is getting a little more relief than they were a fortnight ago, off the back of a small AUD bounce, but still well below where the same conversion sat back in December.

A twelve month forward, locked in around June before the swing accelerated, would have fixed a rate well above where the market sits today. A limit order set above the market would have caught the December peak automatically, no need to have watched the calendar that week. Neither requires predicting where the pair goes next. Both only need the rate to have been worth catching, and this year, it was.

The GENIUS Act is starting to bite. From this point, nobody can issue a US dollar stablecoin without a federal or state licence. That is regulation catching up to something that has run unregulated for years, and it is a good thing if you touch stablecoin rails, since it separates the operators who can prove their reserves from the ones who cannot. Worth knowing if it comes up in conversation. It still does not touch the currency conversion sitting underneath any of it.

That is it for this week.

If any of this lands close to where you are right now, a contract coming up, a transfer to manage, or a first move abroad you are trying to plan properly, reply and tell me. I read every one.

Chris

SportsFX. Currency strategy for professional sport.