Australian Dollar May Surge 12% in 2009 on RBA Policy, NAB Says

By Candice Zachariahs

Dec. 18 (Bloomberg) -- Australia’s dollar may advance 12 percent against the U.S. currency next year as the central bank stops cutting interest rates and global economic growth rebounds, National Australia Bank Ltd. said.

The so-called Aussie in 2009 may recover to 79 U.S. cents, jump 19 percent versus the yen and gain 13 percent against the euro, Sydney-based John Kyriakopoulos, head of currency strategy at the nation’s biggest lender by assets, wrote in a note dated yesterday. His forecast for the Aussie versus the U.S. dollar was the most bullish of 42 firms surveyed by Bloomberg News.

“There are good reasons to believe that the Australian dollar hit a cyclical trough of 60 U.S. cents in October,” Kyriakopoulos wrote. The currency will “outperform but not until China sentiment bottoms.”

Investors should buy the Aussie below 70 cents, targeting 79 cents, and exit if it weakens to 67.20 cents, National Australia Bank said. It traded at 70.56 cents at 1:02 p.m. in Sydney and has lost 20 percent this year versus the greenback.

National Australia Bank also recommends buying the local dollar when it is below 60 yen as the Aussie may rise to 73 yen by end 2009. The stop-loss on the trade is 58.20 yen, Kyriakopoulos said. The Australian dollar traded at 61.53 yen after having dropped 37 percent this year.

Australia’s dollar may advance toward 55 euro cents by the end of next year and should be bought below 50 euro cents, the bank said. Traders should sell the Aussie if it falls to 48.50 euro cents. It traded at 48.89 euro cents from 49.21 yesterday.

Growth, Interest Rates

The Australian dollar has dropped this year as the collapse of Lehman Brothers Holdings Inc. in September caused credit markets to collapse and pushed the world’s biggest economies into recession. The World Bank said Dec. 9 that international trade will shrink in 2009 for the first time in 25 years as global growth slows and commodity prices slide.

Demand for commodities influence the Aussie since raw materials account for 60 percent of Australia’s exports.

Commodity prices will recover in 2009 on the back of “a massive spending boost and rapid interest-rate cuts” in China, wrote Kyriakopoulos. The Australian dollar will “outperform” once expectation of a slowdown in China bottom, he wrote.

The Reserve Bank of Australia, which has lowered interest rates 3 percentage points since September, will end its most aggressive rate-cutting cycle since 1991 in the March quarter, according to National Australia Bank. “Historically, the Australian dollar has troughed once the RBA has finished cutting interest rates,” wrote Kyriakopoulos.

To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net