Forex Flash: Australian Dollars getting Cheaper - Westpac
FXstreet.com (Barcelona) - Tim Cameron, Strategist at Westpac belies that Australian Dollars have become cheaper in H2 2012, particularly in the shorter dated markets.
He writes, "1 year bills-libor has narrowed more than 15bps compared to its Aug highs in contrast to the 10bps in 5 year bills libor (see chart across). Implied 3m bills-libor has narrowed even further as the system remains awash with AUD"
Cameron feels that this could be due to the fact that as the carry trade potential of the AUD dwindles, foreign players are more cautious in reinvesting their AUD, so are rolling their AUD balances for the time being.
He sees contributing factors to the narrowing basis include reduced offshore funding offered by domestic banks, large Uridashi redemptions yet few vehicles for the Japanese to reinvest their AUD, and the increased cost of Kangaroo issuance due to regulatory reform. He believes that weakness looks set to continue.
He writes, "1 year bills-libor has narrowed more than 15bps compared to its Aug highs in contrast to the 10bps in 5 year bills libor (see chart across). Implied 3m bills-libor has narrowed even further as the system remains awash with AUD"
Cameron feels that this could be due to the fact that as the carry trade potential of the AUD dwindles, foreign players are more cautious in reinvesting their AUD, so are rolling their AUD balances for the time being.
He sees contributing factors to the narrowing basis include reduced offshore funding offered by domestic banks, large Uridashi redemptions yet few vehicles for the Japanese to reinvest their AUD, and the increased cost of Kangaroo issuance due to regulatory reform. He believes that weakness looks set to continue.
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