Key points are as follows…
· After recent sharp falls the $A may see a short-term bounce, but the broad trend is likely to remain down against the $US reflecting a rising $US generally, a secular downswing in commodity prices, overvaluation in terms of relative prices and monetary tightening in the US relative to Australia.
· So while the $A may consolidate into year end, it’s expected to see another leg down next year taking it to around $US0.80.
· The downtrend in the $A is good news for the local economy and share market (via a boost to earnings), but along with the downtrend in commodity prices highlights the case for global investments in foreign currencies.
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