Cheap shot, Phil Baker:
Mention the Australian dollar on a currency trading desk right now and someone might say: Can’t kill it with an axe.
Despite a range of reasons to sell the local dollar it looks like it’s on its way to US92¢.
At the beginning of the year, Bloomberg asked almost 50 strategists where the dollar was heading and the answer, or median forecast, was the local unit would fall to US85¢ this year.
Indeed, Goldman Sachs thought it would fall more than 20 per cent in the next two years to below US70¢. And it might still get there.
Forecasting the $A is often viewed as a mug’s game, but there were so many reasons to short the $A it was universally seen as the next big trade.
And it still is for anyone with regard for risk as well as return. It is March, FFS. And frankly, even if takes much of next year to get to 80 cents and below, a well placed investment offshore or locally with offshore exposure, yielding a modest 5%, will still get you awesome return incorporating the capital gain (in a purely stylised example).
What’s more it is naturally hedged.
