Comments reported in the Sydney Morning Herald from Deutsche Bank's chief economist Adam Boyton
Says there are further upside risks for the AUD, to above 80 cents US
Cites:
- Shrinking current-account deficit (helped by surge in commodity prices)
- Australia now only needs about a third of the capital it required a year ago to cover the shortfall
- Interest rates differential (Australian yields > US yields) suggests that capital will keep coming in ... inflows surplus to the current-account's smaller requirements will put upward pressure on the currency
- "In essence we are comparing export-driven movements in the current account deficit to interest rate differentials; arguing that an export-driven narrower current account, for any given interest rate differential, should see a higher Australian dollar''
Doubts it gets to the mid-80s
- Would negatively impact on the domestic economy
- The RBA would cut interest rates in response