Via a note from a Danske customer on the Australian dollar
- the bank like the AUD above “in the absence of new shocks”
- has the potential to go higher
- AUD / USD is undervalued around the current spot
Danske says other currencies are also undervalued against an “overvalued” US dollar. Please note, however, that overvaluations / undervaluations may persist for some time.
- AUD / USD long remains, in our view, a key recovery trade: its characteristics China / cyclical / commodities coupled with a strong valuation argument make it an attractive candidate for global reflation trade
- Differences in inflation between countries may appear in the aftermath of COVID-19 and may also change real exchange rates over time
- the medium-term risk of a global trend towards global reflation is well covered with a long AUD / USD