From the SMH blog:
The Australian dollar is likely to trade in the US60 cent range, or even as low as the US50c range in the next few years, according to Credit Suisse’s head of fixed income and economic research, Ric Deverell.
“People are being way too conservative,” Mr Deverell said in an interview with the Australian Financial Review. “The differential between US and Australian five-year bond yields is now only 50 basis points. The last time the differential was 50 basis points the Australian dollar was trading below US50 cents.”
As US rates start rising, the carry trade, where investors borrow in US dollars at low interest rates to buy higher-yielding assets in Australia will unwind sharply, said Deverell…
…Mr Deverell said the US Federal Reserve Bank would start raising rates this year, probably in June, and he predicted that US rates would rise further than people are expecting.
Correct! Though the Fed will not get far with its rate hikes and I expect Q3 at the earliest.Here are the spreads:
The dollar is being held up by the short end, clearly illustrating how far behind the curve is the RBA and APRA.
My forecast (guess that is) for the cycle bottom remains…wait for it…45 cents.
