Magellan Flagship Fund portfolio manager Chris Mackay urged investors to be cautious about the current strength of the Australian dollar, pointing out that the local currency remained overvalued. Mr Mackay, the former chairman of UBS in Australia, says We continue to urge patience and caution regarding currency, but our views remain firm regarding the fundamental overvaluation of the Australian dollar. The Australian dollar has risen in recent months, hitting a low of 89 US cents in August before rising to 95 US cents as of this morning. McKay notes that the probability of a sustained correction increased further over the past 12 months. The fund is currently short the AUD, as it holds borrowings in the local currency and shares in offshore assets. The MFF portfolio posted record strong gains (~35%) for FY13, largely due to the appreciation of the US greenback against the Aussie dollar. (VIEW LINK)


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