Trades of the South Pacific
This strategist sees a promising trade with the Australian and New Zealand dollars.
Tired of following every minuscule bit of news from the euro zone? Help is at hand. David Forrester, senior vice president for G10 FX Strategy at Macquarie, has been telling clients about a trade he likes down under.
Forrester told CNBC that it's just about the right time to sell the Australian dollar against the New Zealand dollar. True, the Reserve Bank of Australia is set to meet on Tuesday, and forecasters expect interest rates to remain unchanged. But Forrester says that with the Aussie approaching 1.30 against the kiwi, "at those levels it's clearly overvalued."
At the same time, Forrester argues, "a drought, combined with slower China growth, may mean that soft commodity prices will outperform hard," which should benefit the New Zealand dollar at the expense of the Aussie.
Forrester further notes that employment reports in Australia have been beating forecasts while New Zealand reports have been coming up short. "So the risks there are skewed for Aussie-kiwi lower," he says.
MULTI CURRENCIES v The Dollar
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