The key points are as follows:

• After doubling in value against the $US over the last decade, the best is likely behind for the Australian dollar.
• The commodity price boom is starting to fade in response to a moderation in Chinese growth as commodity supply starts to increase, the impact of quantitative easing in the US is being blunted by rate cuts in Australia with the prospect of more to come and the rise in the $A has exposed the high cost base of the Australian economy.
• While further gains are likely in the value of the $A against the Yen (to around ¥110 by year end), the $A is likely to remain range bound this year against the $US with the risks on the downside, particularly over the next few years.
• For Australian based investors, this means less need to hedge global exposures back to Australian dollars.

To read this edition of Oliver’s Insights, click here.

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