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AUSTRALIAN DOLLAR'S RALLY AT VANGAURD OF GLOBAL RECOVERY
Analysts can’t keep up with the strongest 3 month rally for Australia’s dollar. They are raising forecasts faster than any other major currency on optimism for for a global economic recovery. Driven by demand for the highest interest rates in the developed world, the Aussie dollar is defying the countries first recession in 18. The dollar is up more than 21% since February 25, its quickest gain since it started trading freely in 1983 according to Bloomberg data.
The median year-end Aussie forecast in Monthly Bloomberg has risen 14 percent against the US dollar this year, the biggest increase among the 16 most traded currencies.
Strategists at 23 major financial houses raised median estimates this month on speculation China’s demand for Australian exports would rebound. Mellon Capital Management reversed bearish Aussie bets in February, deciding it would outpace all currencies. ‘The bears are throwing the towel and the Aussie is undervalued” said Paresh Upadhayaya, a senior vice-president at Putnam Investments in Boston. Policy makers “still have the rate differentials to support the currency” he added, “Asia is still going to expand and China and India will have growth above 5%. That’s fuelling demand for commodities so Australia’s exports are holding up much better than” the rest of the G10 most developed nations.
Best favouring the Aussie votes of confidence that global economies are on the mend, Australia was at the ‘vanguard of a global recovery’ said Glenn Maguire a Societe Generale economist in Hong Kong, after reports showed retail sales jumped by the most in 3 months in March, exports to China soared 70% this year and the jobless rate unexpectedly dropped last month.
Woolworths, the country’s biggest retailer said last month the first quarter sales rose faster than analysts estimated. Some Aussie pessimists are betting on a global recovery. Deutsche Bank, the biggest currency trader, recommends borrowing Australian dollars to buy the real to benefit from Brazils higher interest rates. Both economies rely on commodities exports that benefit from worldwide wide growth. Other analysts say the currency’s rally probably doesn’t have much staying power. “The Aussie dollar is fully valued given the subdued recovery story we see going on” Anthony Michael at Aberdeen Asset Management in Singapore. Australia’s legal tender also may weaken as investors turn to assets in emerging markets like Brazil and South Africa where bench mark interest rates are 7.25 and 5.5% higher respectively.
Median estimates see Australia’s economy contracting 0.4% this year the least among G10 nations, then expanding 2.5% in 2010. The US economy will contract 2.8% this year. The Aussie slid 39% versus the US dollar and 47% against the Yen between July and October Last year, as the Reserve Bank of Australia move to reduce interest rates.
Taken From The Star Business Repprt 27/05/09
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See detailed article on house shortages in Australia here...
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