Banking News

NAB expecting downward trajectory of AUD until early next year

(23 July 2015 – Australia) National Australia Bank (NAB) Agribusiness has revised its Australian dollar (AUD) forecasts down with the AUD expected to fall to 72 US cents at the end of 2015, down from the previous forecast of 74 US cents, and NAB predicts the AUD will bottom out at 71 US cents in early 2016, 2 cents below previous forecasts.

General manager of NAB Agribusiness Khan Horne said the disruption in Greece and more importantly the weaker Chinese equity markets of late have contributed to the resumption in the downward trajectory of the AUD.

“The weaker currency is providing important support to local prices and we expect it will continue to weaken through until early next year, which is good news for our export oriented industries,” said Horne.

“NAB has adjusted its NAB’s 2015-16 price forecasts in light of the revised AUD forecast, with upward revisions to wheat, sugar and cotton prices.”

NAB’s average price outlook for wheat is 5.9 percent higher than last year A$306.24/tonne (up from 3.4 percent), cotton is up 12 percent to A$2125.20/tonne (up from 9.3 percent) and sugar has improved from 3.8 percent decline to 1.4 percent decline to sit at A$378.24/tonne.

“On interest rates, we still see the Reserve Bank as having finished cutting.

“We see the next move in rates as up but not until late 2016, and with a lower end point for the official cash rate of 3.5 percent.

“The NAB Rural Commodities Index was steady in June – up 0.2 percent in AUD terms but down 0.9 percent in USD terms.

“The neutral result in AUD terms largely reflects higher grain and protein prices offset by sharply lower fruit, vegetable and to a lesser degree sugar prices,” Horne said.

NAB welcomed the announcement on 20 July by the Minister for Agriculture, Barnaby Joyce on the opening of the live cattle trade to China.

“This deal has the potential to provide unprecedented support to the beef industry and inject real investment into the sector, which is good news for Australian producers.

“Our Asia Desk will be working closely with customers to identify opportunities and provide support into this new market,” said Horne.

NAB’s Rural Commodities Index includes 28 commodities (wheat, barley, sorghum, rice, oats, canola, chick peas, field peas, lupins, wool, cotton, sugar, wine grapes, beef, lamb, pork, poultry, dairy, apples, bananas, oranges, mangoes, strawberries, broccoli, carrots, lettuce, potatoes and tomatoes). The index is weighted annually according to the gross value of production of each industry in Australia.