Perhaps 2013 will give traders a good opportunity to open long positions in the Australian dollar.
In the second half of last year, the Australian economy showed signs of slowing down, with the result that the country’s central bank was forced to return to the level of the base rate of 3%, that is, to the minimum to which the rate was lowered to the height of the global financial crisis. But the “black line” in the Australian economy is close to completion. Australia’s biggest trading partner – China – recently pleases statistics demonstrating the acceleration of economic growth. Accordingly, the prospects for demand from China for Australian raw materials – iron ore and coal, grow. By the way, just for the fourth quarter of 2012, the ore has risen by almost 80%, and this seems to be the limit. Rising prices and demand for Australian raw materials will gradually be reflected in macroeconomic statistics of the country, giving rise to the strengthening of Aussie.
A general trend to increase risky assets may become Driver a or the growth of the Australian currency in 2013.
It have to be stimulated by a number of factors:
- a policy of “quantitative easing” by the Fed, the Bank of Japan and other central banks;
- easing of tensions over the debt crisis in the euro zone;
- acceleration of growth in the world economy.
However, there is a number of risk factors for the growth of the Australian currency. Firstly, the delayed effects of last year’s braking will still appear sometimes (for example, last week we learned about the growth of the unemployment rate from 5.2% to 5.4%). Secondly, many analysts believe that the Reserve Bank of Australia this year will still be forced to take a reduction in the rate (or even one) to spur economic growth. Even if these predictions do not come true, as long as they make investors wary of buying “Aussie.” Thirdly, there is a danger that large investors, including central banks, which fear of the collapse of the euro zone was transferred earlier part of their reserves in the Australian dollar, will now begin to move back into the euro, which will put pressure on the Aussie.
I recommend long-term investors to closely monitor the dynamics of sentiment regarding the “Aussie” to under favorable conditions to buy the Australian currency against those who’ll take the markets in 2013, the role of “scapegoat.” But, the wait can be quite long. In any case, we will have to wait until February 5, when a regular meeting of the Reserve Bank of Australia will take place. If the central bank doesn’t reduce rates and declares improving prospects, it will greatly assist the implementation of “bullish” scenario for Ozzy. In addition, the Chinese statistics, and the resolution of the situation around the “ceiling” of the U.S. debt will be greater importance.