The Australian dollar has stubbornly resisted broad expectations it would weaken, and now some bears are starting to step away from their calls.
Goldman Sachs advises investors in Australia's stock market should buy options to protect against the risk the Australian dollar may continue to hover around current levels, which would weigh on earnings.
"While our view is that Australian growth will trend down and that the RBA (Reserve Bank of Australia) will cut rates again (25bp in September), the extension of loose monetary policy by global central banks and ongoing Chinese reserve diversification remain the biggest risks to our bearish Australian dollar view," Matthew Ross, head of portfolio strategy for Goldman Sachs in Australia, said in a note Tuesday.
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The stars appear to be aligned for a bearish view on the currency. Ross noted that a weaker Australian dollar is a consistent call among sell-side analysts, with the economy set for sub-trend growth as the mining sector is becoming a drag as commodity prices fall. In addition, the housing sector's peak contribution is behind it and consumer reaction to a harsh federal budget has been negative, Ross said.
Instead, the Australian dollar has climbed over 4.5 percent against the U.S. dollar so far this year.