The Aussie Dollar is around six cents off its lows, but while most forecasters reckon that it is at or near the top, Clifford Bennett, chief economist at Investor Unity, reckons the currency is on its way to parity and beyond.
Yesterday he tweeted:
BUY AUD aggressively, mainstream idea of risk averse sell off all wrong. I am Australian, therefore I am Asian. Get over it people. Buy AUD
Bennett’s been forecasting currencies for more than a decade and as you can see, he’s the kind of strategist, forecaster and economist who’s not afraid to make a call. But this call is – on the face of it – so out of market, Business Insider had to talk to him to find out what’s driving such an extremely bullish view.
He started by telling us it is a “screaming buy” before gaving us his top 10 reasons for being bullish the Aussie dollar. In summary they fall into a couple of core themes;
- He is a believer in China’s growth story and as such, strength in resource and commodity prices.
- He reckons the US is going to have a weaker growth profile going forward, impacting on the US dollar, which will impact the positioning built up in expectation of the taper and stronger growth; and
- He is a firm believer that Australian growth (as we have seen recently in business data) is in recovery post-election and will benefit from our proximity to Asia.
Love him or hate him – and there are plenty on both sides in the Twitterverse – can you really argue that the above views are extreme?
Rather, as the RBA seems to be finding out, the hope that the Aussie is going to cascade lower to help out economic rebalancing might be the more easily dismissed case than Bennett’s bullish one – at least in the long run.
It’s a point picked up on by ANZ chief economist Warren Hogan who told journalists last week that over the very long run, it might the kind of Aussie dollar prices we saw in the 80s and 90s that are out of line, not recent strength. Hogan noted the Aussie dollar was now back in a structurally higher zone and would likely range between 80 to 110 cents to the US dollar in the future.
Bennett holds a similar view. He told Business Insider he thinks the Aussie will be back at parity by year’s end and that ultimately over the next two years would head to the 1.10-1.12 zone and average 92 cents to $1.12 against the US dollar in the future.
But it is a big out-of-market call to be bullish Aussie Dollars at the moment and Bennett’s detractors comment that he was mega-bullish on the way down to 88 cents recently. But as always, it is a question of timeframes.
Bennett said he had apologised to his clients for this big miss – which in itself is a cause for applause in an industry prone to disposable forecasts with all care and no responsibility – noting he felt it was a hedge fund attack on the Aussie Dollar on the back of fears about Chinese growth and emerging markets.
This theory seems to gel with the data flow both from China and the BRICs on the downswing and then the recovery in the Aussie Dollar.
The dollar’s biggest bull is bullish and if Bennett is right then the Australian economy might just be in a bit of strife – at least on the domestic front. That means the RBA might want, or need, to cut rates more than it currently thinks likely.
But then again, overseas holidays and internet shopping are likely to boom.
Greg is currently in a trading hiatus but you can still follow him on Twitter.