Didn’t fully catch the AUD bearish trade

I have benefited slightly from the falling AUD but overall probably a little disappointed I did not have more of an underweight after writing quite a lot about the high 70s being a very good opportunity to short AUD/USD. More recently after the RBA cut unfortunately there was no short term bounce to around 75 I was hoping for to further short.

About 4% of my portfolio I estimate is below the targeted AUD exposure I look for. In recent times rather than trading I have seen stocks such as UOS, GVF, HHV, AGF reasonable options to keep a core balance in my portfolio that should benefit from a declining AUD.

I am predominately concerned about the iron ore price weakening again. Also the apartment markets in many cities worry me. Historically overseas “hot money” coming into a country to purchase off the plan apartments is a classic end of boom signal and we are now seeing many sales torch a lot of money. The losses are probably understated as I am sure many purchased when the AUD was higher and hoping for a rising AUD but they have lost on both counts. I have to admit though with other areas of the property market the RBA cut seems to have helped things. The approvals and buildings being commenced versus projected dwelling numbers needed are becoming more and more concerning and is why I am likely to be at least modestly underweight the AUD for a while yet. (DISCLAIMER – I never would have predicted correctly the current Australian property boom though!) The USD looks ok for the time being as it appears the Fed wants to try and get another token rate hike in. Assuming the stock market does not have a correction which they seem to freak out about but would never admit, I imagine this well get through. I think they will dramatically change direction within a year from now, however to keep some credibility left this may need to be communicated slowly meaning the USD is probably not the worst currency around for the next little while.

 

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