The Australian dollar may be in line for a double-digit fall into the “mid-60s” versus the US dollar before the summer of next year, says a senior money manager at Pendal Group.
At a conference this weekend, Vimal Gor, Pendal’s head of income and fixed interest, suggested that US interest rate hikes would continue to offer support for US currency; on the other hand, the Reserve Bank of Australia’s insistence on record low rates, both for now and the foreseeable future, offered a strong disincentive to invest in Australian dollars.
A fall to 65 US cents (to avoid ambiguity) from Friday’s settlement of 74.4 US cents would mark a near-13 percent decline in the Australian dollar’s value and would take it back to financial crisis levels last seen in early 2009.
Worryingly for holders of Australian currency, Gor’s team have a recent history of success, having correctly predicted May’s financial disarray in Turkey, and their view is supported to some degree by two of Australia’s largest banks, Westpac and ANZ, both of which have expressed pessimism on the Australian dollar in recent weeks. While Westpac sees 72 US cents as most likely by the middle of next year, ANZ simply advises to “sell the rallies.”
On the charts, there isn’t much to be hopeful about either. The “Aussie,” which is already among the worst performing G10 currencies of the year, settled on Friday on the trading week’s low, which is never a good sign. This last occurred on the week ending March 16th and preceded a 3.5 percent fall to current levels, and before that, on the week ending February 2nd, from which we’ve now fallen 6 percent. Longer-term charts also show AUD/USD breaking from an upwards trend channel and meaningful psychological support won’t be in play until the 70 cents handle.
This coming Tuesday brings with it RBA meeting minutes (11:30am GMT+10) but this is unlikely to offer up any surprises or impact currency markets significantly given the clarity of Governor Philip Lowe’s message last week. “There is not a strong case for a near-term adjustment in monetary policy,” Lowe said.