Is AUD/USD Over Sold?
Australian Dollar has fallen 26% against USD and 36% against JPY this year. Is this the end of the downfall or there is more to come?
Australian financial system no doubt has similar problem as the rest of the world but analyst say that it is in better shape than Japan or US. Analysts are hoping that China’s demand for new infrastructure would greatly help. China remains the Australia’s biggest import and export partner and all eye are on the new $500 billion plan to create more roads, railways and bridges. Further interest rate cuts in Australia is only going to further help the economy.
Estimate by Bloomberg survey says AUD may further weaken to 64 US cents by the end of the year and rally back up to 68 US cents by end of 2009. International Monetary Fund predicts Australia’s growth to expand only 1.8% by June 2009, not bad considering U.S., Japan, U.K. and the euro region are headed for their first simultaneous recessions since World War II.
Australian Stock Index also dropped 42% this year resulted mainly from decline in Commodity demand. BHP Billiton Ltd., the world’s largest mining company, fell 36 percent as steel mills in China asked to defer iron ore deliveries because of slowing demand.
There are tough times ahead for most economies however Australia may be the dark horse we all looking for.
Source: Bloomberg
