A leading US currency manager is favouring the euro as growth in Europe starts to improve, while the Australian economy is starting to show signs of a slowdown.
A leading US currency manager is favouring the euro as growth in Europe starts to improve, while the Australian economy is starting to show signs of a slowdown.
However, Bridgewater Associates portfolio strategy director Rob Zink says while he is bullish on the euro, there are still negatives — some of which favour the Australian dollar.
“Europe is running a positive current account and we are starting to see signs of growth,” Zink says.
“However, real yields are rising in Australia — which favours its dollar.”
Zink was speaking in Melbourne last week as part of the roadshow launching Lend Lease’s new international share trust with currency management. Bridgewater will be the currency manager for the new product.
While being bullish on the euro, Zink is neutral on the US dollar.
“The background to the US and Australian dollars are similar, as both countries have high growth rates,” he says. “The inflation rates are similar, but the real bond yield tends to support the Australian dollar.”
Zink believes the US could factor-in another rate rise before Christmas, but any weakness in the US share market may delay that move.
Zink does not believe the Reserve Bank will consider the US overcoming Y2K problem when it looks at using interest rate rises to slow US growth.
Zink is moderately bearish about the yen, but Australia’s stronger growth favours the dollar.
“The interest rate differential favours the Australian dollar. Any rating of the yen may cloud Japanese growth,” he says.
