Oliver's Insights - The Australian dollar on its way to parity again
This note looks at the outlook for the Australian dollar. The key points are as follows:
- The Australian dollar (A$) has recovered sharply from its lows last year reflecting a combination of US dollar (US$) weakness, stronger commodity prices and the likelihood Australia will be the first major country to start raising interest rates.
- While a short term correction in the A$ looks likely, the broad trend is likely to remain up reflecting the realities of a commodity constrained world and the relative strength of the Australian economy. Another attempt at parity is likely next year.
- This presents obvious challenges for the Australian economy as trade exposed manufacturers and service industries suffer a loss of competitiveness. For investors, it means there is a case to limit exposure to unhedged international investments.
