Analysts at Morgan Stanley have turned bearish on the Australian dollar, as they believe the US dollar rally is likely to extend in the coming months.
Key quotes
“We turn bearish on AUD/USD outright and recommend short positions as we believe the USD rally is starting to broaden out now that we are likely entering Regime 3 of our four-regime USD framework.”
“AUD/USD is likely to fall in Regime 3 regardless of whether equities rise or fall, though its declines would be more pronounced in a risk-off environment.”
“We think hawkish expectations for the July RBA meeting (a top-up in QE but a failure to roll the YCC bond) is increasingly in the price, suggesting risk/reward is increasingly favoring a dovish outcome, not a hawkish one.”
