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11 Dec 2014
AUD deeper and down – Rabobank
FXStreet (Barcelona) - Jane Foley, Senior Currency Strategist at Rabobank, notes that AUD is down a considerable level than previous year spot around 0.91, while highlighting the reasons behind AUD’s dismal performance.
Key Quotes
“One year ago the AUD/USD spot rate was positioned around 0.91 and the 12 mth consensus forecast for AUD/USD stood at 0.89. Our forecast, while below the consensus at 0.87, also failed to capture fully the downside momentum in the AUD that would build during the course of 2014.”
“Although Australia is not a major oil producer, the AUD maintains a fairly strong correlation with the oil price. In part this is due to Australia’s substantial coal exports. As it stands AUD/USD maintains a closer relationship with oil than it does with coal anyway given the market’s tendency to view the oil price as a proxy for demand in commodities in general.”
“In addition to the negative influence from the oil price, the AUD has also been pressured recently from a revival in calls for further policy easing from the RBA. In the statement that accompanied the last policy meeting on December 2, the RBA suggested that “the most prudent course (for policy) is likely to be a period of stability in interest rates”. However, it also commented that it “still expects growth to be a little below trend for the next several quarters” and it continued to talk down the value of the currency. Since then the value of Australia’s effective exchange rate has softened. However, it remains well above levels that persisted at the start of this year and this is a function of the sharp appreciation in the AUD/JPY exchange rate this year; a trend which has been in place since the middle of 2012.”
“In recent months, there has been a step up in verbal intervention from various RBA officials. Last month, the RBA’s Kent commented that the central bank has not ruled out FX intervention. Despite prevailing concerns about the high levels of household debt, the chances of further easing from the RBA early next year have grown. We are revising down our forecasts for AUD/USD to 0.80 on a 3 mth view and to 0.78 on a 6 to 9 mth view.”
Key Quotes
“One year ago the AUD/USD spot rate was positioned around 0.91 and the 12 mth consensus forecast for AUD/USD stood at 0.89. Our forecast, while below the consensus at 0.87, also failed to capture fully the downside momentum in the AUD that would build during the course of 2014.”
“Although Australia is not a major oil producer, the AUD maintains a fairly strong correlation with the oil price. In part this is due to Australia’s substantial coal exports. As it stands AUD/USD maintains a closer relationship with oil than it does with coal anyway given the market’s tendency to view the oil price as a proxy for demand in commodities in general.”
“In addition to the negative influence from the oil price, the AUD has also been pressured recently from a revival in calls for further policy easing from the RBA. In the statement that accompanied the last policy meeting on December 2, the RBA suggested that “the most prudent course (for policy) is likely to be a period of stability in interest rates”. However, it also commented that it “still expects growth to be a little below trend for the next several quarters” and it continued to talk down the value of the currency. Since then the value of Australia’s effective exchange rate has softened. However, it remains well above levels that persisted at the start of this year and this is a function of the sharp appreciation in the AUD/JPY exchange rate this year; a trend which has been in place since the middle of 2012.”
“In recent months, there has been a step up in verbal intervention from various RBA officials. Last month, the RBA’s Kent commented that the central bank has not ruled out FX intervention. Despite prevailing concerns about the high levels of household debt, the chances of further easing from the RBA early next year have grown. We are revising down our forecasts for AUD/USD to 0.80 on a 3 mth view and to 0.78 on a 6 to 9 mth view.”