Betting against a bottomed dollar

As the Australian dollar continues to fall several key sectors of our economy are rejoicing. And with the Fed set to phase out QE, it may not be long until we see the unit hit 85 US cents.

Despite rising a little to 91.25 US cents this morning, the Australian dollar touched a fresh 3-year low of 90.40 US cents yesterday. When the US Federal Reserve starts to tighten monetary policy, probably in the next 10 to 12 weeks, there is a genuine risk that a supercharged US dollar could drag the local currency lower.

This seems to be the main theme behind the rush from market economists and strategists to abandon their “rebound to parity” forecasts of a few weeks ago and move to 85, 80 or even 75 US cents as a central case forecast.

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