Finport Currency Brief - Courtesy of Compass Global Markets.
The A$ has been held at recent lows by another bout of healthy US data, (the "US Leading Index" had its third consecutive increase), whilst the RBA has just released its minutes from the most recent meeting and they have of course bemoaned any further rise in the currency.
Market focus is on Thursday morning's US Fed minutes, so in the absence of any shocks, we should continue to float just above 2 year long support.
This gives us time to look at the medium to long term and a report released this morning from investment banking giant Morgan Stanley. They see the A$US 67c next year and 65c the year after, as yield for government backed investments here diminishes. The note says "Interestingly, the last time the spread between US and Australian bonds was consistently this narrow was in 2001, when the Aussie slid to 47.76 cents, the weakest since being allowed to float freely in 1983".
That's great news for exporters, but not all doom and gloom for importers as other forecasters, including myself, have the completely opposite opinion and that this long term upward trend will hold for an average rate of 0.80c for next year - perhaps even 0.85c; should the US not hike interest rates as much as some hope and China continues on its merry way.
In the meantime; we sit at fair value and I'd suspect not bad levels for both sides of the fence.
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