Everyone forecast the death of the Aussie dollar in 2016, however, interest rate differentials and resurgent commodity prices pushed the local currency to a peak of 78 cents early in 2016. Of the 600+ Livewire members that responded to our 2017 Outlook Survey only 5% see the currency ending the year above 80 cents. 47% of respondents see the currency trading at roughly the same level and 48% believe 2017 is the year the dollar will eventually crack and finish below 70 cents. We put this question to a panel of fund managers, economists and strategists with their responses available below. It appears the consensus view is that the risks are to the downside with commodity prices and US interest rate hikes the key factors to watch.
Q. Where does the AUD dollar finish next year?
Chart: 93% of survey respondents see the AUD staying flat or heading lower
Chris Stott, Wilson Asset Management
We think it moves up, Matthew, rate rise coming, resources strength, the dollar goes up.
Ben Clark, TMS Capital
I think it's going to be pretty flat without wanting to sit on the fence. I think you'll see slightly weaker commodity prices next year, but the market's expecting an interest rate cut or semi-priced in which I don't think you're going to see.
Chad Slater, Morphic Asset Management
Well, we see three out of four scenarios for it to go down, so we think the weight of probability is much lower. Prediction? Sub 65 cents
Commodities will continue to play a major role on the AUD
Shane Oliver, AMP Capital
Lower. I'd say around 68 cents. A point forecast is always impossible to get right, so I'm using that as an indicative level. I think the reality is the Fed will raise rates probably on three occasions, which is what the Fed's currently suggesting itself. In Australia, we'll be cutting, and so that interest differential will widen against Australia, pushing the Aussie dollar lower.
Vimal Gor, BT Investment Management
I would say lower, but I think there's a chance it goes higher in the short term. Prediction? It’s sitting at 75 cents today, I'd say 65 cents by year end.
Richard Coppleson, Bell Potter
Up for the first four or five months, 80 cents to 82 cents with the terms of trade going up and the current account deficit reducing.
Then falling later on as we get maybe three, maybe even four US rate hikes.
Steve Johnson, Forager Funds
I think roughly the same again. If there's going to be a large move, I think it will be to the downside.
Matthew Kidman, Centennial Funds
On the back of weaker commodity prices, I think the dollar does eventually fall under 70 cents, lands somewhere high 60s.
Jon Shapiro, The Australian Financial Review
It's a close one, but I'd say down. I think interest rate differentials will trump higher commodity prices. Prediction? Below 70 cents.
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Disclaimer: The information contained in this presentation is general in nature and should not be relied upon. Before making any investment of financial planning decisions, you should consult a licensed professional who can advise you whether the decision is appropriate for you. Contributors to this show may have commercial or financial interests in the companies mentioned.