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Credit Suisse Goes Bullish On Aussie, Sees 0.80 And HigherBy Shuli Ren
The Australian dollar will drift higher, according to Credit Suisse currency strategist Koon How Heng, who upgraded the Aussie to positive from neutral today.
Heng sees three reasons why the Aussie will go higher.
First, the Reserve Bank of Australia will continue to stick to a monetary policy geared towards inflation targets. As long as Australia’s inflation holds up, the RBA will
keep its rates steady too, despite two cuts this year. Heng writes:
Both headline and underlying inflation should stabilize at current levels in H2 and the largest part of the downshift in inflation expectations is also likely over. In fact, Australia’s Q2 inflation data, while relatively weak, did not deteriorate further compared to Q1.
Last week, the outgoing RBA Governor Glenn Stevens warned of the
limits to rate cuts and quantitative easing in his last public speech as the governor.
Second,
stable and strong iron ore prices will give the Aussie a boost. Iron ore is Australia’s
largest export. Iron ore prices have climbed from just $40 per metric ton at the start to the year to about $60 now.”This positive outlook for crude oil is generally supportive of the energy complex and consequently, positive for AUD/USD as well.”
Third, yield! Even after the two cuts, the RBA’s benchmark rate is
still at 1.5%. The 10-year Australia government bond yield is at 1.89% now, so much more attractive than U.K’s 0.55% and Japan and Germany’s negative rates.
The Australian dollar has risen 5% this year to 0.7639 per U.S. dollar this morning. The iShares MSCI Australia ETF (EWA) has gained 10%.
Source: Barron's Asia
http://blogs.barrons.com/asiastocks/201 ... nd-higher/
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