Bloomie has a nice line up of quotes from global asset managers on the Australian dollar today with which I completely agree:
Japanese investors overseeing $47 billion say the Aussie’s strongest rally in five months is a false dawn, as a slowdown in China’s factories overshadows signs of strength in the South Pacific economy.
Mizuho Asset Management Co., which supervises $39.4 billion, predicts the currency will fall to 80 U.S. cents in a year after surging to 89.59 on Feb. 7. Tokyo-based BNP Paribas Investment Partners Japan, which manages the equivalent of $7.6 billion, is waiting for lower levels before buying the nation’s debt…
“The currency is going to weaken,” said Yusuke Ito, a Tokyo-based portfolio manager at Mizuho Asset. “The driver of growth for China is changing from infrastructure investment to service-oriented growth. During that process, commodity prices like iron ore or coal are going to come down, and that’s going to hurt Australian exports.”
…Goldman Sachs Group Inc. said the Aussie may extend its slump as capital flows from reserve managers weaken and the commodities boom fades.
“Could we see in two years time something like 70 or high 60s handle?” Thomas Stolper, the bank’s chief currency strategist, said at a Feb. 7 conference in Sydney. “Absolutely possible in our view. Not necessarily in a straight line, not necessarily a sharp move, but that’s just the normal rebalancing that you would expect in this situation where you go into a big cyclical change of the magnitude happening at the moment in the commodities sector.”
…Naruki Nakamura, head of fixed income at the BNP business in Tokyo, said Stevens’s statement wasn’t enough to prompt him to boost his Aussie assets as easing growth in China threatens the South Pacific nation’s exports. He may add to his holdings if the currency falls to the 3 1/2-year low reached on Jan. 24.
“We have a chance to get there,” Nakamura said of the Aussie. “The slowdown in China and several other emerging countries will be negative for commodity prices and the Australian economy.”
The odds of a “6 handle” for the Aussie in the next few years are excellent in my view.
