National Australia Bank has revised down its Australian dollar currency forecast, suggesting a value around US70c by the end of this year, before bottoming out in the first quarter of 2016 at around US68c.
The adjusted forecast is US3c lower than earlier indications, and comes in light of the recent depreciation of the Chinese Yuan, combined with the likely continuation of weak terms of trade.
The revision is contained in NAB Agribusiness’s August Rural Commodities Wrap.
NAB’s general manager of agribusiness Khan Horne said the expectation that the Australian currency will continue to weaken is good news for Australian agricultural producers and exporters.
“The Australian dollar’s downward trend accelerated in August with the People’s Bank of China’s devaluation of the Yuan, combined with risks to the growth outlook in China,” Mr Horne said.
“The continued weakness of the A$ means valuable support for local prices well into 2016,” he said.
In the August Rural Commodities Wrap report, NAB also revised up its beef price forecast to average 40 percent higher than in 2014-15.
“There are signs that declining beef slaughter is likely to continue, owing to a shortage of stock, which means the upside for prices is as high as it has ever been,” Mr Horne said.
“Our outlook for the beef industry is strong, with confidence underpinned by solid global fundamentals and strong beef prices in the year ahead.”
The Eastern Young Cattle Indicator continues its upward climb into record territory, breaking through the 550c/kg mark in late July to set a new record at 568.25c earlier this week, easing a little to 564cc/kg yesterday. Overall, the EYCI was up 9.5pc in July.
The NAB Rural Commodities Index* rose a further 4.1pc in A$ terms in July, supported by a lower dollar and higher beef, fruit, domestic wheat and sugar prices. Overall the index was down 0.4pc in US$ terms.
* NAB’s Rural Commodities Index includes 28 commodities (beef, lamb, pork, poultry, wheat, barley, sorghum, rice, oats, canola, chick peas, field peas, lupins, wool, cotton, sugar, wine grapes, dairy and a selection of fruit and vegetables). The index is weighted annually according to the gross value of production of each industry in Australia.
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