MENU

Is the Aussie dollar set to rally to US84 cents in 2019?

It’s a pretty wild prediction as far as forecasts go, but a leading currency expert is warning us to prepare for an Aussie dollar revival that will send our dollar shooting to US84 cents by the end of next year.

The Aussie is currently fetching a little over US71 cents and the forecast 18% surge in our currency will have a material impact on your share portfolio and our economy – if it comes to pass.

But Bank of America Merrill Lynch’s (BoAML) head of G10 foreign exchange strategy Thanos Vamvakidis is known for making controversial and accurate calls, according to the Australian Financial Review.

Most experts are tipping the Aussie to hover around the US70 cent mark next year although Vamvakidis thinks many are underappreciating the strength of our economy and overestimating US economic growth.

Australia has a strong labour market and has a reasonably diversified economy that can withstand some level of slowdown in China.

On the flipside, he estimates that the US dollar is 5% to 7% overvalued and that too many traders are “long” on the greenback (betting that the US currency will rise).

This means the US dollar is a crowded trade and any hiccup will send the US currency falling hard as traders rush for the exits.

That scramble may be sparked by the realisation that US President Donald Trump’s tax cut only provides a temporary and one-off boost to the US economy. Its impact is already starting to fade.

The other risk is the US mid-term elections. A decisive win by the Democrats could trigger a US dollar slide as Trump’s ability to get more stimulus into the economy will become a lot harder to implement, explained Vamvakidis.

Such a strong rally in the Aussie is not out of the question although I am still positioning my portfolio for a further fall in the Aussie to between US65 cents and US69 cents next year due to the widening interest rate differential and housing market weakness.

This means I have a bias towards large caps with material US dollar exposure, such as Brambles Limited (ASX: BXB) and Boral Limited (ASX: BLD).

However, if the Aussie does come fighting back in 2019, it’s importers that will benefit the most from the currency.

This includes retailers like Reject Shop Ltd (ASX: TRS) and McPherson’s Ltd  (ASX: MCP) that buy products in US dollars, as well as local industrials like fuel retailer Caltex Australia Limited (ASX: CTX) given that it purchases gasoline in US dollars.

There are three other stocks that the experts at the Motley Fool believe should be on your watchlist for FY19. These stocks are well placed to outperform the market and you can find out what they are by following the free link below.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor Brendon Lau owns shares of Boral Limited, Brambles Limited, and The Reject Shop Limited. The Motley Fool Australia has recommended The Reject Shop Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…

Including:

The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!