The Australian dollar could drop below the psychologically significant barrier of US90 cents as early as this week, according to several leading economists, with some tipping the currency could fall as low as US83 cents by the end of the calendar year and US75 cents by the middle of next year.
“Economic news out of the US is certainly good but significant fiscal problems are still yet to emerge there, which will be a drag on growth. The Australian dollar is doing the RBA’s work for it, and if the currency keeps falling the RBA may well not cut rates further,” HSBC chief economist Paul Bloxham said.
However, not all analysts share the view, with Deutsche Bank foreign exchange strategist John Horner suggesting the Australian dollar might have fallen by too much already.
“We’re not bearish about China, and think markets have overdone the response to a batch of bad news in recent weeks. Even if the Federal Reserve does begin to unwind its bond-buying program it has said interest rates will remain low for a very long time, and the Bank of Japan, of course, will continue to pour liquidity in the market,” Horner said.
The Bendigo and Adelaide Bank and Westpac-owned BT Financial have revealed they are bullish about the $12.5 billion margin lending sector, which lends money to managed funds and share investors.
For Bendigo Bank, the bullishness comes despite their margin loan book shrinking by over 20% to $2 billion during calendar year 2012.
“[We] may well have seen the bottom of the market for the margin lending sector. It is early days yet, it does seem that the time is right to invest further in the margin lending business to ensure we are not latecomers to the opportunity,” Bendigo Bank chief executive Mike Hirst said.
“We’ve seen material improvement in overall activity, including significant appetite for fixed-rate margin loans. However, it’s too early to make the call whether we are witnessing a permanent return to higher levels of confidence,” a BT spokesperson said.
Crown executive chairman James Packer has likened the company’s proposed $1.5 billion casino-hotel development at Barangaroo Point to winning a television sporting rights deal.
“This is like a media company buying sporting rights where you are happy to end up in a break-even position for the halo effect it has over the rest of the network,” Packer told The Australian.
“We modelled and bid Crown Sydney to approximately a 9% IRR (internal rate of return), which is basically a break-even position.”
The Dow Jones Industrial Average is up 0.59% to 15224.69. The Aussie dollar is up to US91.4 cents.
Andrew Sadauskas is a former journalist at SmartCompany and a former editor of TechCompany.
