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A$ to remain a highly attractive currency - Westpac

FXStreet (Bali) - Robert Rennie, FX Strategist at Westpac, continues to support longs in the AUD/JPY, which currently trades at a 16-month high.

Key Quotes

"While commodity prices continue to fall, last week's RBA policy statement suggests "a period of stability in interest rates" and while AUD/JPY is at 16 month highs, Japanese demand for A$ assets is strong and increasing given today's MOF data. Indeed, today's data showed A$2.65bn of Japanese buying of A$ assets in July and A$16bn over the last year. This would be closer to some of the strongest demand from Japanese investors seen over the last 6 years, and this all ahead of the next big lift to global liquidity."

"Bottom line, I don't see the recipe for an imminent sharp move lower in the A$. To be sure, as Bill noted in the latest Market Outlook publication "one “event” that is certain to occur – the curtailment of the Federal Reserve’s QE3 program in October - might be just that source of higher volatility" required to push the A$ back towards our year end forecast of 0.90. However, beyond that, I continue to expect the A$ to outperform currencies such as the £ and € even in the face of a stronger US$. Last week's ECB announcement simply added weight to that view."

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