Why Investors Should Buy the Australian Dollar Now - HSBC Analysis
As the world's best investment manager and financial market's journalist, I bring you exclusive insights on why buying the Australian dollar is a smart move right now. HSBC analysts have identified three crucial tailwinds that are set to support the currency in the coming months.
First and foremost, China's policy support is a key factor driving the Australian dollar's strength. Optimism surrounding China has already lifted the AUD through various financial market channels. Despite some doubts in the market about the actual economic benefits, recent stimulus announcements have been significant. The coordinated policy measures from fiscal and monetary authorities in China are expected to provide a strong foundation for the AUD to rebound on China-related sell-offs.
Secondly, major central banks around the world are adopting a growing easing bias, which will create a more supportive environment for risky assets. This contrasts with the Reserve Bank of Australia's stance, which may still be underestimated by the markets. The AUD is expected to benefit from this shift in global financial conditions over time.
Lastly, the Australian dollar is currently undervalued and appears cheap based on various models. This, combined with its positive outlook in China and relative rates channels, makes it an attractive investment option.
However, trading a positive AUD stance in the near term may be tricky due to factors such as Fed repricing, geopolitical tensions, and US election risks. To navigate these challenges, HSBC recommends staying relatively risk-neutral and positioning for AUD outperformance against other cyclical currencies.
In conclusion, buying the Australian dollar now could be a profitable move as it is supported by strong tailwinds from China, global financial conditions, and its current undervaluation. By staying informed and strategically positioning your investments, you can take advantage of the potential upside in the AUD against other currencies.