Three forces taking turns
The Australian dollar weakened during the course of 2013 under the weight of three key forces: a broad-based dollar advance, policy uncertainty in China, and the need for domestic rebalancing at home. 2014 has begun in a similar vein with each driver taking turns to apply further downward pressure. The start of Fed tapering has already hurt. Looking further ahead, Australia’s capex survey due on Feb 27th is likely to inflict further damage, as it quantifies the speed at which the mining investment boom is receding.
Read the full report: UBS