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JANA expects drop in the value of the Australian dollar

Investment firm says the dollar is currently too high for domestic industry


The Australian dollar is likely to fall as current supporting factors begin to fade, according to investment consulting firm JANA Investment Advisers.

While Australia’s industry has been dominated by mining over the last decade, the big unknown is how the industry will change in a post-boom environment, the firm’s senior adviser Jeremy Wilmot says.

He believes the dollar will decrease over the medium term but is sitting well above average levels and is “uncomfortably high” for domestic industry.

“It is hard to find opportunities to invest in a low-return environment,” Wilmot says.

“JANA’s approach is to diversify in the absence of any compelling opportunities.

“Flexibility is crucial in this environment.”

He says Australia’s fortunes are now more closely tied to those of China’s and that the Reserve Bank of Australia is caught between two prevailing forces: the unemployment rate and housing prices.

“The economy may need looser monetary policy to transition from the mining boom, however they are also concerned about asset price bubble,” he says.

“Traditionally, bonds have been the best portfolio hedge however with yields still close to historical lows this is no longer the case.”

Australia has avoided the depths of the GFC on the back of the huge stimulus in China and targeted domestic incentive, he adds.

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