Big global real money investors – the slow-moving pension funds, mutuals and insurers that usually think long-term and provide the undercurrent for the rest of the market – are selling Australian dollars in droves, worried about the global economic slowdown, geopolitics and reining in risk.
“Flows into the Australian dollar in the past week absolutely collapsed,” Dwyfor Evans, State Street’s head of APAC macro strategy, says.“ investors are very overweight the Aussie dollar but in the past couple of weeks, and I would actually argue in the past week, they’ve begun to aggressively sell it.”
Evans says the selling is more about a general deterioration in risk appetite thanks to the slowing global economy, higher-for-longer interest rate expectations and geopolitical instability, all of which pushes investors out of things like the Australian dollar and back to the greenback. So, if the next move is down, when is the RBA likely to cut? Evans says not for a while; there should be a three to six-month period where interest rates stay put.
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