Morgan Stanley: Sell Australian dollar

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Via MS:

Limit Order (28-Sep-17)
  • Entry: NY Close 28-Sep-17;
  • Target: 0.7500;
  • Stop: 0.7960
The rates market have priced in two RBA hikes for the next 12 months which we find to be overly aggressive given highly levered Australian households and weak medium and long-term fundamentals.
  • We think it is worth fading against this breakout in Aussie rates and should result in a weaker AUD, if our view is correct.
  • The AUD remains vulnerable to lower commodity prices, weaker data of China and higher rates in general.
  • We think the Aussie rate should outperform relative to US leading the AUD/USD cross to fall.
  • The risks to this trade come from continued strength in domestic data, a rebound in commodity prices and wider AUD/USD rate differentials

Spot on.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.