Back
20 May 2014
AUD remains weak - BTMU
FXStreet (Barcelona) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ, observes the increasing weakness around the Aussie dollar.
Key Quotes
"The Australian dollar has continued to weaken in the Asian trading session with the AUD/USD rate falling back below the 0.9300-level. Australian dollar weakness has extended following the release overnight of the latest RBA board meeting minutes which revealed that the RBA appears to have downgraded their outlook for employment growth."
"The RBA noted that “the recovery in the labour market over the forecast period is expected to be fairly drawn out. GDP growth is not expected to rise above trend before mid-2015."
"Accordingly the unemployment rate is not forecast to begin declining consistently until after this”. It supports our view that the RBA is in no hurry to begin raising rates with the timing of the first rate hike more likely a story for the 2H 2015."
"The implied yield on the December 2015 90-day bank bill futures contract has declined by around 0.50 point so far in 2014 to 3.07% highlighting that the market is already moving to discount a more modest pace of tightening in the coming years. Still the carry attractiveness of the Australian dollar has been improving alongside the ongoing decline in financial market volatility."
"The ratio of the three-month yield spread between Australia and the US divided by the three-month implied ATM AUD/USD volatility, which is a measure of carry attractiveness, has risen back to levels which were evident between mid-2011 and early 2013 when the AUD/USD spot rate remained relatively stable above parity. It signals that if financial market conditions continue to remain stable, there still appears scope for carry demand to lift the Australian dollar further in the near-term. S&P have also clarified that there is no immediate risk to Australia’s AAA-credit rating after comments yesterday from S&P sovereign analyst Michaels to the Australian Financial Review that the agency is “looking to see the government improve budget performance over the next few years”."
Key Quotes
"The Australian dollar has continued to weaken in the Asian trading session with the AUD/USD rate falling back below the 0.9300-level. Australian dollar weakness has extended following the release overnight of the latest RBA board meeting minutes which revealed that the RBA appears to have downgraded their outlook for employment growth."
"The RBA noted that “the recovery in the labour market over the forecast period is expected to be fairly drawn out. GDP growth is not expected to rise above trend before mid-2015."
"Accordingly the unemployment rate is not forecast to begin declining consistently until after this”. It supports our view that the RBA is in no hurry to begin raising rates with the timing of the first rate hike more likely a story for the 2H 2015."
"The implied yield on the December 2015 90-day bank bill futures contract has declined by around 0.50 point so far in 2014 to 3.07% highlighting that the market is already moving to discount a more modest pace of tightening in the coming years. Still the carry attractiveness of the Australian dollar has been improving alongside the ongoing decline in financial market volatility."
"The ratio of the three-month yield spread between Australia and the US divided by the three-month implied ATM AUD/USD volatility, which is a measure of carry attractiveness, has risen back to levels which were evident between mid-2011 and early 2013 when the AUD/USD spot rate remained relatively stable above parity. It signals that if financial market conditions continue to remain stable, there still appears scope for carry demand to lift the Australian dollar further in the near-term. S&P have also clarified that there is no immediate risk to Australia’s AAA-credit rating after comments yesterday from S&P sovereign analyst Michaels to the Australian Financial Review that the agency is “looking to see the government improve budget performance over the next few years”."