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

Sydney Morning Herald article is here