Aussie dollar to surge to 80 US cents
With the Australian dollar rising sharply to 75 US cents off strong commodity prices, VanEck is anticipating the currency will hit 80 US cents within six months.
VanEck head of investments and capital markets, Russel Chesler, said Australia’s improving terms of trade could be good news for local companies and consumers battling rising costs for imports priced in foreign currencies.
“With the Australian share market also outperforming the US equity market, along with the yield on the 10-year Australian government bond surging to 2.70% this week, Australia could attract more offshore investment, adding more upward pressure on the local currency,” Chesler said.
Chesler said rising oil prices and wheat future prices were providing headwinds to the Australian dollar.
“This month alone, oil prices are up by close to 24% and wheat future prices have surged 18%. The movements are even more extreme in year-to-date terms, with both oil and wheat prices up around 58% and 42%, respectively.”
He said investors may wish to consider hedging some of their offshore equity and fixed income exposures in response to the rising dollar.
“Hedging can provide valuable protection against rises in the Australian dollar, which erode return from offshore investments once they are converted to local currency.”
AUTHOR
Liam Cormican
Recommended for you
Two JPMAM commentators have warned advisers about the dangers of moving assets into cash during market volatility, describing it as “swopping one risk for another”.
The global alternative asset manager has confirmed the acquisition of IP Generation.
Zenith Investment Partners will see its co-founder and managing director both depart this year due to their ambitions no longer aligning with those of its parent company.
Strategic partnerships are the number one priority for JPMAM, according to its EMEA CEO, having already enacted two deals with large New Zealand and UK wealth management groups.
