MS maintains its bearish view on AUD and targets 0.84 for year-end against the USD, anticipating a further 10% decline next year to reach 0.76 by year-end 2015.
The main external factor behind this view is that MS expects a negligible near-term impact on the AUD from the China-Australia Free Trade Agreement.
On the domestic factors, MS economists have downgraded their macro forecasts for Australia, highlighting stalled economic rebalancing and a deeper terms-of-trade shock which should adds to AUD bearishness.
"The domestic macro story appears to be deteriorating as well for AUD. Our Australian economists see the transition of the resource-boom-driven growth model to the East Coast Recovery stalling and have accordingly downgraded their domestic macro forecasts," MS clarifies.
In line with this view, MS maintains a short AUD/USD position in its portfolio from 0.8850 targeting 84. MS also maintains another short-term trade from 0.8670.
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