Sell AUD Buy JPY

AUDJPY is a sell as the AUD rise over the past year has resulted in an extreme overvaluation and the risks it faces all point to a more pronounced and prolonged correction for the currency pair in the coming months.

Risks to the AUD

1. Slowing of M&A inflows: Australia has benefited from significant positive
M&A inflows over the past two years, especially in natural resources. The Australian
government's decision to block the purchase of the Australian stock exchange by the
Singapore stock exchange on national interest grounds may signal greater resistance
to this inflow. Wayne Swan's Anti-Asian stance may cost the AUD in JPY terms.

2. A shift in market attitudes from 'risk on' to 'risk off': As we saw in early March,
a shift in market sentiment can see months of positive carry returns wiped out in a
short space of time. IMM data suggests record long speculative positions will make
the AUD vulnerable.

3. A slowdown in China: Australia is heavily exposed to the Chinese economy both
directly through exports and indirectly through the impact of Chinese growth on
commodity prices.

Continued monetary tightening in China risks a slowing of the
economy that would have negative implications for perceptions about the AUD.

Even though growth in China is strong and may surge again in late 2011 the
impact on the AUD may be reduced.

Shayne Heffernan

Shayne Heffernan oversees the management of funds for institutions and high net worth individuals.

Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

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