So says Bloomie:
Investors betting Australia’s dollar will continue to weaken may want to reconsider. Analysts see the currency rebounding on China stimulus and Reserve Bank of Australia rate-hike prospects.
The Australian dollar fell to a 10-month low of 63.57 cents versus the greenback last week, with asset managers holding a record net short position of 94,107 contracts on the currency. Growth concerns in China, the nation’s largest export market, and higher US yields have made it the worst-performing G-10 currency this quarter.
But the Aussie is poised to rally in the coming weeks, ending the year at 66 cents and reaching 68 cents by March, according to a Bloomberg survey of strategists and economists. The outlook is seen improving as China is taking measures to boost its economy, while the RBA may go for another rate increase by December, showed a separate Bloomberg survey.
Of the three arguments, the one that makes the most sense is positioning:
Any rebound in Chinese growth will be temporary as property won’t turn sustainably. If that is true, then the RBA will also be cutting next year as bulk commodities catch down to the underlying realty.
In the short term, we could easily see the positioning shakeout argued by Bloomie, especially if CNY lifts.
But, beyond your nose, the AUD stench remains overwhelming.
