Bloomberg News

Morgan Stanley Cuts Forecasts for Commodity-Linked Assets

July 03, 2012

Morgan Stanley (MS:US) cut its forecasts for the Australian, Canadian and New Zealand dollars, citing what it called an increasingly challenging global economic environment for the commodity-exporting countries.

The Aussie will depreciate to 95 U.S. cents by year-end, compared with the previous projection of 99 cents, New York- based Morgan Stanley said in a note today. New Zealand’s dollar will finish the year at 75 U.S. cents, compared with the earlier forecast of 80 cents. The Canadian dollar will weaken to C$1.06 against its U.S. counterpart, versus the previous forecast of C$1.03, the firm said.

Weakening global growth indicators are affecting commodity currencies, according to the note from Ian Stannard, head of European currency strategy at the firm in London. Purchasing- manager indexes for manufacturing in many Group of 10 nations have dropped below their lows of late last year, he wrote, and central banks are being more cautious.

“Declining growth indicators and a muted policy response are likely to leave the high-beta currencies in a vulnerable position,” the Morgan Stanley strategist wrote. Beta measures risk relative to a market.

The Australian currency traded today at $1.0286 in New York, while New Zealand’s dollar was at 80.48 U.S. cents and the Canadian dollar at C$1.0131 to the greenback.

The European Central Bank will cut its benchmark interest rate a quarter-percentage point to 0.75 percent at its meeting on July 5, according to economists in a Bloomberg News survey.

“The central-bank meeting isn’t going to be enough to lift global risk appetite,” Stannard said in a telephone interview. “We’re going to get monetary easing that is aimed more at responding to a more traditional growth slowdown rather than trying to boost risk appetite.”

To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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Companies Mentioned

  • MS
    (Morgan Stanley)
    • $32.01 USD
    • 0.26
    • 0.81%
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