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8 Sep 2014
A$ to remain a highly attractive currency - Westpac
FXStreet (Bali) - Robert Rennie, FX Strategist at Westpac, continues to support longs in the AUD/JPY, which currently trades at a 16-month high.
Key Quotes
"While commodity prices continue to fall, last week's RBA policy statement suggests "a period of stability in interest rates" and while AUD/JPY is at 16 month highs, Japanese demand for A$ assets is strong and increasing given today's MOF data. Indeed, today's data showed A$2.65bn of Japanese buying of A$ assets in July and A$16bn over the last year. This would be closer to some of the strongest demand from Japanese investors seen over the last 6 years, and this all ahead of the next big lift to global liquidity."
"Bottom line, I don't see the recipe for an imminent sharp move lower in the A$. To be sure, as Bill noted in the latest Market Outlook publication "one “event” that is certain to occur – the curtailment of the Federal Reserve’s QE3 program in October - might be just that source of higher volatility" required to push the A$ back towards our year end forecast of 0.90. However, beyond that, I continue to expect the A$ to outperform currencies such as the £ and € even in the face of a stronger US$. Last week's ECB announcement simply added weight to that view."
Key Quotes
"While commodity prices continue to fall, last week's RBA policy statement suggests "a period of stability in interest rates" and while AUD/JPY is at 16 month highs, Japanese demand for A$ assets is strong and increasing given today's MOF data. Indeed, today's data showed A$2.65bn of Japanese buying of A$ assets in July and A$16bn over the last year. This would be closer to some of the strongest demand from Japanese investors seen over the last 6 years, and this all ahead of the next big lift to global liquidity."
"Bottom line, I don't see the recipe for an imminent sharp move lower in the A$. To be sure, as Bill noted in the latest Market Outlook publication "one “event” that is certain to occur – the curtailment of the Federal Reserve’s QE3 program in October - might be just that source of higher volatility" required to push the A$ back towards our year end forecast of 0.90. However, beyond that, I continue to expect the A$ to outperform currencies such as the £ and € even in the face of a stronger US$. Last week's ECB announcement simply added weight to that view."