JP Morgan $AUD Predictions for 2006

Although the consensus view is to the contrary, the analysts at JP Morgan are voicing the opinion that the Australian dollar will fall to 0.71 against the USD by June 2006 and then fall further to 0.69 by the end of 2006.

This view is based on the assumption that the change of language used by the US Fed shows it is likely to continue tightening interest rates, and as a result Australia’s interest rate advantage is disappearing, the analysts say.

If the Reserve Bank of Australia remains on the side lines, as the analysts expect, US and Australian cash rates could reach parity in 2007, the analysts calculate.