Short Aussie, Long Peso: Strategist
China March exports saw a return to surplus of 8.9 percent on the year, while imports undershot expectations, growing at 5.3 percent.
Kit Juckes, Global Head of Foreign Exchange Strategy at Societe Generale, is wary of the trade data and its impact on the Australina dollar.
“Imports are looking as if they’re trending down and that reflects weak Chinese demand. If I’m an Australian exporter, I think that’s what I should be looking at,” Juckes told CNBC.
“From one day to the next you might get some feel-good from a GDP number, but Chinese domestic demand is slowing and Chinese growth isn’t going to go back to the 10-13 percent rates that we had in the unsustainable go-go years,” Juckes said.
With a bearish outlook on the Chinese economy, Juckes added that his strategy was to stay short of the Aussie dollar.
“If anything goes wrong, it [Aussie dollar] is the most overvalued of the major currencies on most of our long-term models,” Juckes explained. “It looks to me like a currency that could fall 10 percent and frankly that would be good for rebalancing the Australian economy if anything were to go wrong in China—I don’t like owning it.”
For those who expect China to weaken, Juckes suggested shorting the Aussie dollar and investing in the Mexican Peso.
“You can be sure to get something else with yield, like the Mexican Peso, if you do not want to lose money on interest from day to day,” Juckes said.