A Sydney-based fund manager that profited from the selloff in Turkey’s bonds and currency last month now expects a slump closer to home, as a stronger greenback weighs on the Australian dollar.
The Aussie may fall more than 10 percent to the “mid-60s” U.S. cents in 12 months, said Vimal Gor, head of income and fixed interest at Pendal Group, at a conference Thursday. A hawkish Federal Reserve will continue raising rates “until something breaks,” while its Australian counterpart stands pat, he said.
“The U.S. is the only country that’s genuinely hiking rates, so the interest-rate differential story is giving a huge tailwind to the dollar,” Tim Hext, a Sydney-based portfolio manager in Gor’s team, said separately by telephone.
Pendal’s view follows the Reserve Bank of Australia’s decision to keep interest rates at a record low 1.5 percent last week after a key unemployment metric edged higher. RBA governor Philip Lowe once again highlighted concern over the outlook for household consumption amid sluggish wages growth and high debt.
China is Australia’s largest trading partner so anything that has an impact on commodity demand is not good news for the economy and therefore the currency.
The Australian Dollar pulled back from the region of the trend mean this week to confirm the medium-term downward bias.
The S&P/ASX 200 Index is exhibiting an inverse correlation with the Australian Dollar so it firmed from the 6000 area today to confirm support in the region of the trend mean.Back to top