NAB: Australian dollar to 80 cents

See the latest Australian dollar analysis here:

Macro Afternoon

These kinds of forecasts hang on continued “risk on” flows but they are no longer incredible:

NAB has raised its forecasts for all G10 currencies including the Australian dollar.

Head of FX strategy Ray Attril says the move “reflects our increased conviction that the recent weakening in the USD is ’for real’ and has a fair way to play out over the coming couple of years at least”.

He now sees the Aussie at US74c in December 2020 versus US72c previously, US78c in December 2021 versus US75c previously, and US80c at June 2022 versus US75c before.

Mr Attrill says short-term “fair value” for the Aussie has been boosted by a combination of improved risk sentiment and commodity price gains, while NAB’s longer-term AUD valuation model, driven more by real interest rate and commodity price variables, also sees the rise since March as fully justified.

Westpac adds more bullishness:

USD breakdown likely to continue amid the Fed’s stimulus commitment, virus-thwarted rebound prospects and an ongoing positive reappraisal of EUR’s long-term prospects following last week’s EU fiscal burden sharing accord. Short USD positioning approaching the bottom percentile of the last 16 years but that is likely to endure while yield spreads remain unappealing.\

The upside limiting factor is that the developing unwind in house prices and cratering consumption. But, given the Lunatic RBA has already put the cue in the rack for more easing, that also limits the impact on the AUD of crushed domestic demand.

The MB Fund has progressively shifted its forex hedge to EUR.

David Llewellyn-Smith
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Comments

  1. I always chuckle when I see these big bank forecasts and then look at spot.

    9x out of 10 the market reaction is momentarily the opposite.

  2. Maybe
    But I’d just like to say
    It’s very interesting to observe that all these banks come out now at 72c AUD (55 3/4 months ago) & Gold $1470 3/4 months ago & silver $12.70
    It’s just an observation ….

    For me I wish they’d told me at 55c we were going to 80, that would have really helped me at 55c anyway guess time will tell…,,,

  3. Maybe
    But I’d just like to say
    It’s very interesting to observe that all these banks come out now at 72c AUD (55 3/4 months ago) & Gold $1470 3/4 months ago & silver $12.70

    Buy gold & silver now…. mmmm
    It’s just an observation ….

    For me I wish they’d told me at 55c we were going to 80, that would have really helped me at 55c anyway guess time will tell…,,,

  4. RanganutsMEMBER

    Hooray for manufacturers who import and make stuff… like me!

    (That said, as far as currency goes when everyone starts saying the same thing it usually goes in the opposite direction)

  5. The FNG.MEMBER

    Tom Luongo’s take on weak US dollar is interesting. Not necessarily correct, but interesting.

  6. call me ArtieMEMBER

    The real-world outcome of MMT. Markets stay boyant forever, rich get richer, things get worse for the poor and disadvantaged

  7. Unlike before the virus, investing is now easy: you can even just hold AUD cash and your currency’s buying power is rocketing up!

    I remember that, before the virus hit, I was questioning the value of holding anything denominated in AUD at all – and I was right. But then….the US couldn’t have sucked much worse at managing the virus, and are now tanking their currency – wow, how quickly things can change!

    • Mike Herman TroutMEMBER

      Tell me about it burb, up until a month or so ago I was more concerned about the AUD cratering and how I can best protect against that. That may very well be in play at some point but for now up she goes….(maybe :))