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20 May 2013
Flash: We expect AUD/USD to remain heavy - UBS
FXstreet.com (Barcelona) - The Aussie Dollar has been under tremendous pressure lately, falling just over 900 pips in the past few weeks and trading at its lowest level since early June 2012.
According to Mansoor Mohi-uddein, Head of Foreign Exchange Strategy at UBS, “for the first time in a year, the Australian dollar is trading back below parity against the US dollar. We expect the currency to stay heavy against the greenback in a 0.95-1.00 range now given the Reserve Bank of Australia is likely to cut interest rates again following this month's 25bps reduction in its cash rate to 2.75%. Domestic data continues to be soft including business conditions and wages. In Q1 wages grew at 0.7%q/q the second lowest reading in thirteen years.”.
He went on to add, “in the week ahead the RBA releases its April meeting minutes. These will cast more light on the prospects of a follow up interest rate cut. In addition a potentially bigger risk to the currency is approaching with the publication of the quarterly capital expenditure report on May 30. If Australia's investment boom wanes more rapidly than expected, then the central bank may have to ease more aggressively. That could cause the currency to weaken sharply back towards levels between 0.80-0.90 that are consistent with underlying fair value against the US dollar”
According to Mansoor Mohi-uddein, Head of Foreign Exchange Strategy at UBS, “for the first time in a year, the Australian dollar is trading back below parity against the US dollar. We expect the currency to stay heavy against the greenback in a 0.95-1.00 range now given the Reserve Bank of Australia is likely to cut interest rates again following this month's 25bps reduction in its cash rate to 2.75%. Domestic data continues to be soft including business conditions and wages. In Q1 wages grew at 0.7%q/q the second lowest reading in thirteen years.”.
He went on to add, “in the week ahead the RBA releases its April meeting minutes. These will cast more light on the prospects of a follow up interest rate cut. In addition a potentially bigger risk to the currency is approaching with the publication of the quarterly capital expenditure report on May 30. If Australia's investment boom wanes more rapidly than expected, then the central bank may have to ease more aggressively. That could cause the currency to weaken sharply back towards levels between 0.80-0.90 that are consistent with underlying fair value against the US dollar”