Aussie Dollar and currencies

Posted: February 12, 2015 in Uncategorized

The Aussie Dollar finally fell and will continue falling for a while (currencies cycles are usually pretty long.

The average target is US 70 cents.

Definitely it is a great advantages for international exposures (on average, last year, the currency contributed approximately 16% for the Australian investor).

Moreover now the Aussie Dollar is starting to show weakness not just versus the US Dollar, but also the Euro, Yen and Asian currencies including Yuan (in its trading band).

The major beneficiaries is the healthcare sector, but also mining had some protection from the commodities fallout as most commodities trade in USD.

On the other side of the coin, the strength of the US Dollar is starting to impact the US. In March, US earning season, we will really be able to quantify how much damage the currency did to the US.

The biggest issue of the weaker Aussie Dollar position is that is crowded trade.

What you mean by that? Because it is so easy to predict there a lot of geared short positions against the Australian Dollar.

If a unforeseen event (or unlikely as a real Greece exit from Europe) would take place, any short position against the Australian Dollar could unwind very fast – provoking a strong and fast rally in the Aussie Dollar

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