A Quick & Simple View On AUD

AUD/USD has been sliding consistently from the year’s highs and that broad downtrend remains very much in play. Relative interest-rate prognoses are doing much of the damage. The US Federal Reserve is expected to raise its own rates again this month and, should it do so, it will be a significant moment not just for the US Dollar but for the Aussie too.

https://www.dailyfx.com/forex/fundamental/forecast/weekly/aud/2017/12/02/Australian-Dollar-Downtrend-May-Pause-But-Wont-Reverse.html

What may be potential ‘fair value’ for the AUD/USD?

US yield is certainly closing up the gap with the AUS yield, as shown below in the following comparison (using 10Y government bond yield of US and Australia):

US10Y vs AUS10Y.png

As the yield differential is declining, we are seeing corresponding decline in the AUD:

YieldDiff vs AUDUSD.png

As shown below, the regression analysis shows that there is significant statistical relationship between the AUD/USD and the yield differential. At current yield differential of 0.1485%, the forecasted AUD/USD ($0.7368) is relatively higher than the actual AUD/USD ($0.7605), thereby signifying potential future weakness associated with the AUD given the fact the US rate hikes are imminent.

Regression Results.png

The 95%-confidence interval for the forecast AUD/USD is between $0.6041 and $0.8694.

Actual vs Forecast  AUD.png

 

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Capitalizing On Australia’s Ageing Population

Australia’s population is much older today than it has been in the past, and both the number and proportion of older people is growing steadily. In 1964, the median age in Australia was 28.5 years, and 8% of the population (948,100 people) were aged 65 and over. Only 0.4% of the population (50,100 people) were aged 85 and over.

In 2014, the median age had increased by almost a decade to 37.3 years, and the number of people aged 65 and over had more than tripled to 3.4 million. Older people now account for an increasing share of the population—15% of Australians were aged 65 and over in 2014, compared to 8% in 1964. In addition, there has been a ninefold increase in the number of people aged 85 and over, up to 456,600 or 1.9% of the population in 2014.

These trends are predicted to continue into the future, particularly as the baby boomer generation ages. The first baby boomers were born in 1947 and turned 65 in 2012, and will slowly be moving in to the ‘old old’ cohort—those aged 85 and over. Based on population projections by the Australian Bureau of Statistics, by 2064 there will be 9.6 million people aged 65 and over, and 1.9 million aged 85 and over, constituting 23% and 5% of Australia’s projected population respectively Source

Continue reading “Capitalizing On Australia’s Ageing Population”