I was just reading FT Expert, David Bloom’s comments about the Aussie Dollar. Many of our client’s have taken a significant position in the AUD, which pays 3.5% on cash, but we are watching it. CR Capital does not recommend “currency trading”; however, we are sensitive to the possiblity of significant volatility in currencies which is a relatively new phenomena. Bloom says,
” The Australian dollar is our favourite G10 currency, and we see further appreciation throughout the year, with our AUD-USD forecast at parity for the end of 2010. Having weathered the storm of the global economic crisis, Australia appears to have come out the other side largely unscathed. Furthermore, it was the only G10 country to have three consecutive interest rate rises in 2009, and a further rate hike at their meeting in February.
Australia will continue to feel the benefits of China’s growth and expansion throughout 2010 as commodity prices are pushed up and Australia’s terms of trade improve. Economic data releases have also been particularly strong, with consistent large upside surprises in employment data. These two factors, combined with further rate rises, should see the Aussie strengthen.
Since we forecast appreciations in both the Australian dollar and sterling this year, we do not expect much movement in AUD-GBP. We see AUD-GBP at £0.59 for Q1 this year, but remaining at £0.58 for the rest of the year and into 2011. However, we are much more confident about our bullish Australian dollar view, so if we were to see one of the currencies appreciate against the other, it would be the Aussie against sterling, and therefore 65p could not be ruled out.”
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