Australian dollar headed for US96c say banks

DZ Bank and Citigroup, among the top three forecasters for the Australian dollar, predict it will end the year 7 per cent stronger than the consensus.

DZ Bank, the most accurate at predicting the Aussie in the four quarters through June as measured by Bloomberg Rankings, is joined by third-ranked Citigroup in projecting the Aussie will end 2014 at US96¢ from US93.87¢ as of 5 pm Tuesday in Sydney. The local currency gained to touch US94¢ overnight.
The median estimate of more than 50 analysts surveyed by Bloomberg is for a 4.1 per cent slide to US90¢ by December 31.

Australia’s currency is on track for its best annual performance in four years as Reserve Bank Governor Glenn Stevens signals the nation’s key interest rate will probably remain stable at 2.5 percent for some time, while central banks in the US, Japan and Europe keep borrowing costs close to zero. Japanese investors bought 1.16 trillion yen ($US11.4 billion) of Aussie dollar-denominated debt over five months through May, poised for the biggest annual purchases since 2011.

“I’m still a big fan of the Aussie dollar,” Dorothea Huttanus, a Frankfurt-based senior analyst at DZ Bank, said in a July 7 phone interview. “The next step for the RBA will certainly be a rate hike,” she said, adding that it could come as soon as the first quarter of 2015.

Westpac Banking Corp and Societe Generale, the second- and fifth-ranked forecasters, agree with the US90¢ consensus call, according to data compiled by Bloomberg. Wells Fargo, ranked No. 4, sees a gain to US95¢.

Predicting the currency pair’s movement was the hardest of the major exchange rates, with DZ Bank receiving a score of 63.53 when measured for margin of error, timing and direction. That was the lowest score for a top-ranked forecaster.

Australia’s dollar has risen 5.3 per cent since December 31, the best performance after New Zealand’s currency among Group of 10 peers. The Aussie has climbed from a low of US86.60¢ set on January 24, the weakest since July 2010.

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