Forecast of Aud/Usd:
In short term, Australia is facing higher inflation rate (2. 9%) than the United States (2. 1%), this can lead to the domestic market price increase but not much fluctuation for currency exchange rate.
Moreover, Australia has higher GDP growth rate than United States (3. 5% vs 2. 4%) and lower unemployment rate than US, which are 5. 2% and 7. 9% in 2013. Therefore, the income will increase in Australia. Australia consumers would spend more on the US imports and the demand for US will increase. The supply of dollars will increase to buy more US products and the value of USD will increase relative to the AUD.
In conclusion, we predict that the exchange rate of AUD/USD will decrease in the short term. In intermediate term, there will be almost a constant decline of inflation rate each year in Australia while that of United States remains fairly constant. The Inflation rate in United States is still lower than Australia. As a result, it is highly unlikely that the interest rate in Australia will increase by a large amount. On the other hand, the interest rate within the United States would be expected to remain quite low.
In addition, according to the information from IMF, GDP growth of Australia will be stable at 3. 5% while that of United States will increase from 2. 4% to 3. 5%. Although there is a large reduction in unemployment rate in United States, it is still higher than Australia’s. Therefore, as long as the US Federal Reserve will not implement the monetary policy QE3 in the next few years, the currency of the United States will go up against Australia, but exchange rate of Australia will still be slightly higher than United States in the intermediate term.
In the long term (greater than 5 years), the inflation rate of Australia will drop to 2. 4% in 2017 while that of United States will start to rise. On the other hand, GDP growth for both Australia and United States are similar at a stable pace of 4% and are hard to improve?In addition, the unemployment rate will continue to decline to about 4%. After 2017, inflation rates and GDP growth rate of both countries are expected to get closer and closer, achieving the stable coordination finally.
At the same time, the Central Banks should not raise their interest rate to lower the inflation. Therefore, in conclusion, we predict that the exchange rate of AUD/USD will remain at a stable relationship with each other in the long term. Reference: IMF 2012, IMF Data Mapper, 2Executive summary This report focuses on forecasting the trend of exchange rate of AUD/USD and PHP/USD in short term, intermediate term and long term. The fundamental analysis is based on the changes in demand and supply of those three currencies.
In terms of PHP/USD, for short term, the higher domestic interest rate in Philippine and the monetary policy (QE) will be implemented by United States will result in PHP/USD decreases. For intermediate term, as QE grows the GDP of United States, Philippines remain domestic policies and target, the supply of dollars increase faster than demand of pesos decrease, PHP/USD continue to decrease. For long term, those factors which affect the exchange rate will trend to reach an another equilibrium, PHP/USD increase.
As for AUD/USD, due to the increased consumption of Australia on the US imports, the demand for US will increase. Consequently, AUD/USD will decrease in the short term. For intermediate term, Unit Stated will experience an obvious economic recovery while the major macroeconomic variables in Australia generally remain at a stable level, thus AUD/USD will continuous fall, but AUD will still appreciate slightly against USD. In the long term, the economy of both countries are expected to get a stable coordination, so it is likely that the USD will stop depreciating against the AUD and the exchange rate between the USD and he AUD achieve an new equilibrium.
In recommendation, US dollar trend to depreciate against Philippines peso in short and intermediate term, purchasing pesos using US dollars now and exchange back to US dollar in the future which up to 5 years for gaining profit. US dollar trend to be appreciated against AU dollar in short and intermediate term, hence the top manager should hold a short position on the AUD and a long position on the USD, while for the long term the top manager just hold a short position on the USD.