Amundi, which oversees about $1 trillion as Europe’s largest fund manager, predicts gains in Asian currencies amid improving appetite for higher-yielding assets will drive an advance in Australia’s dollar.
“If you are more bullish on equities, risky assets or Asian economies, you can use the Australian dollar as a good proxy to reflect this view,” said Philippe Jauer, the chief investment officer for global fixed income and currencies at Amundi in Singapore. “We’re quite positive on average on Asian currencies, so we believe that because of its high correlation, the Aussie should go a bit higher,” Jauer said in a May 6 interview at his company’s office.
A bigger-than-expected increase in payrolls combined with rebounding imports in China, Australia’s biggest trading partner, sent the Aussie to a three-week high yesterday. Its advance this year mirrors gains in eight of the U.S. dollar’s 11 most-traded Asian counterparts as sustained Federal Reserve stimulus drives demand for higher-yielding assets.
The Australian dollar has risen 5 percent this year to 93.65 U.S. cents as of 1:56 p.m. in Sydney, the best performer after New Zealand’s currency among 10 major developed peers. It touched 93.94 yesterday, the highest since April 15. Amundi’s Jauer sees it climbing toward 95 by year end, a level not seen since Nov. 7, when the Aussie rose as high as 95.30.
The Indonesian rupiah strengthened 5.6 percent since Dec. 31 to 11,529 per U.S. dollar. India’s rupee has gained 2.9 percent to 60.05 versus the greenback, after falling to a record 68.845 in August.
The MSCI Asia Pacific Index of regional stocks climbed 6 percent till yesterday from this year’s low in February.
The Bloomberg-JPMorgan Asia Dollar Index closed at the highest in a month yesterday after Fed Chair Janet Yellen said a day earlier that the U.S. economy still requires “a high degree of monetary accommodation,” which has tended to weaken the greenback. The gauge tracks Asia’s 10 most-active currencies excluding the yen.
Australia’s statistics bureau said yesterday employers added 14,200 jobs in April, more than the 8,800 median forecast in a Bloomberg News survey. A separate report showed Chinese imports rose 0.8 percent in April after slumping 11.3 percent the previous month. Apart from China and Japan, Australia counted five other Asian countries among its top 10 trading partners in March, according to statistics bureau figures.
“Of course you need to know about the domestic fundamentals,” Jauer said. “But about half of the time, the Australian dollar is moving not because of Australian news but because of Asian news.”
With China targeting an annual expansion of about 7.5 percent this year from 7.7 percent in 2013, Amundi favors Australia’s government bonds on expectations growth in the South Pacific nation will also be tempered.
“We’re positive on Australian government bonds, believing that if the Chinese economy is slowing down, the Australian economy also won’t be boiling as much as was the case a few years back,” Jauer said. Amundi has more Australian debt than the benchmark it uses to gauge performance, concentrating on maturities of 5 to 10 years, according to Jauer.
Australian sovereign notes have returned 2.8 percent so far this year, set for or an 8.3 percent annualized return, which would be the most since 2011, Bank of America Merrill Lynch index data show.
Even so, support signaled by officials in the world’s second-biggest economy means China will avert a crisis, Jauer said. Finance Minister Lou Jiwei said this month his nation will boost growth through measures including deregulation and the development of service industries.
“The government is offering a lot of support, so it means China will be less of a victim of big changes in global economic trends,” Jauer said.