Last night the Australian dollar broke out as expected and is flying towards 92 cents:
The longer term chart shows the key levels:
From locked Business Spectator:
The Australian dollar has struck a fresh 2014 high overnight as Bank of America Merrill Lynch analysts issued an upbeat near-term forecast for the currency.
…”While we are US dollar bulls, we are not bullish [on] the US dollar against the Australian dollar,” BofA said in a report. “Across currencies, the Australian dollar is basing and turning bullish.”
BofAML is targeting 95 cents. Who knows? All In can say is, load up your shorts and offshore assets! From the FT:
There is only one good reason not to short the Aussie dollar: it is expensive. But the grounds for taking a bearish view on both the currency and the country become more compelling by the day.
…Recently, an official at one Asian sovereign wealth fund with a $30bn portfolio of Chinese shares sought advice from a big Hong Kong-based hedge fund manager on how to hedge that portfolio in the face of falling growth on the mainland. One answer: short Aussie dollars.
Today, the Australian dollar is the most exposed of the G-10 currencies to China.
Australia is plagued by a currency that is so overvalued it makes oil-rich Norway’s currency look cheap. But the price of oil is high while the prices of Australian commodities are under downward pressure, leading to deteriorating fundamentals.
The contribution of capital spending to GDP was negative in 2013 and is expected to remain negative this year. “We are facing the mining investment cliff,” notes research from Macquarie Securities.
Exactly right. The currency is enjoying its last hurrah on US bond market movements and Chinese stimulus hopes. But the bigger picture is down. There simply won’t be a sustainable Australian recovery until the dollar falls to 80 cents and below.
