"Despite its recent falls the Australian dollar is still over-valued against the benchmark US dollar, but the Aussie is even more expensive when measured against a batch of Asian currencies"
- Thomas Clarke, a portfolio manager and asset allocation specialist at William Blair & Company
The Australian Dollar received a boost from the better than expected data, rebounding from its eight-month low versus the Greenback. The Australian Bureau of Statistics said the nation's trade deficit continue to shrink, narrowing a seasonally adjusted 27% to $787 million. Exports declined as much as 2% in August, while imports dropped 3%. Along with positive trade balance data, Australia also posted surprisingly positive housing data. Building permits in the country skyrocketed 14.5% from the previous year in August, compared with July's jump of 9.4% and much better than the forecast of 9.6%. On a monthly basis the advance was 3.0% up from 2.1%. AUD/USD jumped to a one-week high of 0.8817 from its previous close of 0.8738, further distancing from 0.8662, the eight-month low touched on Wednesday.
However, some experts believe that the Aussie Dollar may fall as low as 75 U.S. cents, after losing more than 7% over the past month. The currency was artificially elevated for years as the Fed has been injecting liquidity in global markets. The fair value of Australia's currency is estimated to be around 74-75 U.S. cents, but given divergent global interest rates movements and the slowdown in China, it is difficult to predict when the currency may reach that level.
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