Dollar forecast to peak at $US1.03 - 紐澳

Dollar forecast to peak at $US1.03
Friday November 20, 2009, 2:44 pm

The already overvalued Australian dollar will reach parity with the US dollar
in the next six to 12 months and peak at about $US1.02-03, a currency
strategist says.

State Street Global Advisers head of currency management Collin Crownover
says the unit is already overvalued by about 20 per cent and that the figure
would stretch out to 30 per cent if it reached the $US1.03 mark.

"I think we'll see about a 10 per cent appreciation from where we are now,"
the London-based Dr Crownover said in Sydney on Friday.

"At that point, certain dynamics come into play and that becomes an extreme
overvaluation.

"Even though Australia has a much better growth profile than the rest of the
G10 right now, people at that level might take pause and say even though the
growth is a lot better, that's pretty rich, relevant to the valuations used
for investments into Australia."

Asked whether he felt the Australian dollar would remain at parity for long
he said: "Perhaps not.

"We do think it will reach parity within the next six to 12 months.

"Then the Australian dollar becomes 30 per cent overvalued and historically
that's been a point at which we see significant imbalances and it's much more
likely to be corrected."

The strength of the local currency two years ago, when it traded as high as
98.5 US cents, was largely due to "speculative flows", while this time the
flows into Australia were of a "more stable, long-term variety," he said. The
currency was trading at around 91.64 US cents on Friday.

Dr Crownover said the US dollar would continue to be the main global reserve
currency, despite talk of the emergence of the Chinese Renminbi.

He said the current weakness of the US dollar was part of a "cyclical
decline".

"We think the US dollar's weakness is consistent with the relative economic
growth in the US," he said.

"We don't see anything abnormal about the US dollar weakness currently at
this phase of the business cycle."

He dismissed arguments that the world was seeing reserve diversification away
from the US dollar, leading to the first stages of a US dollar decline.

"While I certainly think that could happen at some point, it hasn't happened
yet," he said.

"There is no evidence that central bank reserves are being diversified away
from US dollars."

US central bank reserves were now three times higher than they were at the
start of the decade and US dollar reserves had remained roughly at two-thirds
of global reserves since the introduction of the euro in 2002.

He conceded it would be ideal to have a more diversified basket of reserve
currencies, but said there was no other currency which had the same level of
credibility as the US dollar.

He argued the fixed Chinese Renminbi was not undervalued, adding that it
would not become a reserve currency for about two decades.

Authorities in China would allow the Renminbi to appreciate by four to five
per cent against the US dollar in the second half of 2010, he said.

"The reason we think that's not going to happen immediately is that China's
economy is not as healthy as it might seem with the headline GDP (gross
domestic product) numbers and the export sector is still very weak."

He said a failure to allow the Chinese currency to appreciate could lead to a
"massive bubble", due to overinvestment.

http://au.biz.yahoo.com/091120/2/29uqq.html

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I looked around and feel this time I can't pretend.
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I can't keep on believe that you are all over my mind.

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