FXstreet.com (Barcelona) - UBS remains short the Australian dollar as a trade recommendation from last month from 1.0610, targeting a move back below parity, based on both "cyclical reasons as well as structural factors" the bank's FX Team notes.
UBS Economics expects the RBA to cut rates again by 25bps from 3.25% at its next meeting on November 6 as the economy is cyclically weakening; "but we think investors should also short the Australian dollar now for structural reasons as Australia's trade balance is deteriorating, but more importantly, the country's mining investment boom is close to peaking."
UBS adds: "If the rest of the economy is unable to take up the slack given the high exchange rate and still comparatively high interest rates, the Australian dollar may need to fall sharply below parity to restore growth. Thus Australia's economic outlook may be reaching a critical turning point."
UBS Economics expects the RBA to cut rates again by 25bps from 3.25% at its next meeting on November 6 as the economy is cyclically weakening; "but we think investors should also short the Australian dollar now for structural reasons as Australia's trade balance is deteriorating, but more importantly, the country's mining investment boom is close to peaking."
UBS adds: "If the rest of the economy is unable to take up the slack given the high exchange rate and still comparatively high interest rates, the Australian dollar may need to fall sharply below parity to restore growth. Thus Australia's economic outlook may be reaching a critical turning point."
