Investors should sell the Australian dollar and New Zealand dollar, and put their money in the Chinese yuan and the Singapore dollar instead, according to the Head of Asia Research at ANZ bank, Khoon Goh.
“The trade we’ve been recommending is to short the Australian dollar against the Singapore dollar, and to short the New Zealand dollar against the yuan,” Goh told CNBC on Friday.
Shorting is a trading strategy that involves selling a borrowed stock or currency, with a view that it will drop in value, and can be bought back later at a lower price.
“I think that provides a good mix of play into the dovishness of the antipodean central banks and also the resilience of the Asian currencies,” Goh said, referring to the central banks in Australia and New Zealand.
This week, the Reserve Bank of New Zealand shocked investors when it announced its next move in interest rates was more likely to be a cut. The Kiwi dollar was hit as a result on Wednesday, dropping 1.6 percent to below $0.68, while the Australian dollar weakened half a percent to $0.71.
The Australian dollar has also been hit hard this year, pummeled by twin concerns of its own economy and that of China — it’s largest trading partner.
While Goh is expecting both those currencies to fall in value, he was a little more positive on the Australian dollar, saying that there was “further scope for the Aussie to outperform the Kiwi.”
Comparatively, Goh said he was “fairly optimistic about the Chinese yuan.”
“We’re expecting the yuan to appreciate over the course of this year, largely on the back of our view that Chinese growth will start to stabilize in the second quarter as it responds to the various stimulus measures,” he said.