Money in Motion

What's Really Driving Down the Aussie

Opera House in Sydney, Australia.
Ken Ross | Taxi | Getty Images

Happy days are here again in the stock market - and in normal times, that means Australian dollar holders are having fun too.

Just not now.

The risk-sensitive is diverging from the S&P 500 index, and trading lower against the dollar. Some might see this as a bearish indicator for stocks, but Amelia Bourdeau, director of foreign exchange at Westpac Institutional Bank, has other ideas.

"Japanese retail investors may be the reason why Aussie's been so low," she told CNBC's Melissa Lee.

To contend with years of low , retail investors there have shifted much of their money abroad. For a long time, they had substantial holdings in European assets. But as the European sovereign debt crisis ground on, many Japanese moved money out of the euro zone and into Australian assets, Bourdeau says. And now that the euro zone is back from the brink, "data from the Ministry of Finance in Japan is showing that that trend is reversing. They're selling their Aussie assets and going back into euro."

These Japanese investors have a lot of money to move around, Bourdeau says, and their pension funds are quite easy to access, so they can have a significant impact on a currency.

Stocks Are Rallying, So Why Isn't the Aussie?

In addition, the Reserve Bank of Australia on Thursday sharply trimmed its growth forecast for the Australian economy.

So Bourdeau wants to sell the Australian dollar at 1.0345 or a bit lower, with a stop at stop at 1.0420 and a target of 1.0150.

Andrew Busch, publisher of, also wants to sell the Aussie. He points out that on Friday released better than expected economic data, which is normally lifts the Australian dollar.

"We got divergence from positive, really positive, economic news out of China with trade, and the Aussie just could not rally. That's the market telling you people are really still too long Aussie and need to dump it."

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