Shane Oliver, Head of Investment Strategy and Chief Economist.
The attached note looks at the outlook for the Australian dollar.
The key points are :
- A more dovish Fed, better Australian economic data, higher commodity prices and the reversal of high levels of shorts have seen the $A gain 12% from its January low. It could hit $US0.80 in the short term.
- However, the bounce is unlikely to be sustained with a continuation of the secular downtrend in commodity prices and a narrowing in the interest rate differential in favour of the $A likely to see the $A resume its downtrend in the months ahead. Expect a fall towards $US0.60 on a 12 month horizon.
The downtrend in the $A will help the Australian economy, but highlights the ongoing case for global investments denominated in foreign currencies