Via Bloomie:
Australia’s dollar may drop to a nine-year low of 67 U.S. cents as the central bank is set to become even more dovish and lean more toward cutting interest rates, according to money manager Hexavest Inc.
…A lot of damage has already been done to the Aussie, Vincent Delisle, co-chief investment officer at Hexavest, which oversees the equivalent of $14.5 billion, said in an interview in Sydney. A number of other major central banks are trying to catch up with the Fed, “if the RBA’s not playing that same game, bad news near term is you get a weaker currency,” he said.
The fact the RBA is going to stand pat, “and probably talk a more dovish scenario, will make a difference relative to other markets,” Delisle said. That “is going to weigh down on the Australian dollar,” he said.
Amusing stuff. Just wait until the RBA cuts as the tumbling housing market combines with an election stall mid-next year. Assuming the Fed hikes three more times and the RBA is forced to cut twice we get this on the two year US spread:
And the AUD.
