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18 Jul 2013
Flash: Be cautions against excessive short bets in the AUD - RBS
FXstreet.com (Barcelona) - The sustained decline in the Australian Dollar continued well after the recent low point in iron ore, notes Greg Gibbs, FX Strategist at RBS, which suggests "The market is of a mind to dismiss the recovery and remains more watchful of how China now deals with its financial/property bubble" Gibbs said.
Gibbs emphasizes the significant recovery in the Australian resources sector equities since late-Jun, "with some of this reflecting the persistently lower AUD despite firmer iron ore prices, helping bolster Australian mining company profits, and this improvement helping support the AUD, although it has failed to recover as much as these equities suggest it might."
Greg expands: "The AUD fall since April appears to have helped realign the AUD to resources equities and commodities after at least two years of ignoring their fall. With little correlation between AUD and resource equities in recent times, it has hard to conclude the recent recovery in resource equities should support the AUD, but again it cautions against excessive short bets in the AUD at this time."
Gibbs emphasizes the significant recovery in the Australian resources sector equities since late-Jun, "with some of this reflecting the persistently lower AUD despite firmer iron ore prices, helping bolster Australian mining company profits, and this improvement helping support the AUD, although it has failed to recover as much as these equities suggest it might."
Greg expands: "The AUD fall since April appears to have helped realign the AUD to resources equities and commodities after at least two years of ignoring their fall. With little correlation between AUD and resource equities in recent times, it has hard to conclude the recent recovery in resource equities should support the AUD, but again it cautions against excessive short bets in the AUD at this time."