The Australian dollar has been struggling lately with the all around pressure from the US dollar, China and of course the Reserve Bank of Australia.
How can we position towards the upcoming rate decision? The team at Bank of America Merrill Lynch weighs in:
Here is their view, courtesy of eFXnews:
As the RBA appears relatively comfortable with rates where they are, the Central Bank will likely stay on hold at next week policy meeting, projects Bank of America Merrill Lynch.
“We have no doubt that in the short term it continues to scan the environment for any downside risks, but we believe the hurdle for another cut is a high one,” BofA adds.
“We remain medium-term AUD bears but the risk-reward of selling at current levels is not attractive, in our view. The immediate focus for FX investors will be on any changes to the RBA’s FX language: while the statement could certainly acknowledge the recent fall in the AUD, it seems unlikely that the RBA will alter its main message that further depreciation is likely and necessary,” BofA advises.
“The AUD is probably close to the RBA’s estimate of equilibrium but Australia continues to require an undervalued exchange rate to support the non-mining sector and ease the balance of payments adjustment.There seems little reason for the RBA to fine-tune its message and risk an adverse appreciation in the currency at this point,” BofA argues.
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