Australian Dollar Abandoned by Wealthy Asians

Asia’s wealthy are falling out of love with the Aussie dollar as record-low yields and sustained declines persuade them to look elsewhere, according to UBS Group AG.  Many of the bank’s wealthiest clients in the region began to abandon the currency as Australia’s bond yield premium over the U.S. slid and the Federal Reserve discussed raising interest rates, said Simon Smiles, Zurich-based chief investment officer for ultra-high-net-worth individuals. The 10-year yield is 74 basis points above that of the U.S., down from 130 a year ago.

“Two years ago when I came to the region, in most client meetings, people were asking about Aussie assets, the Australian dollar, yield play; when you talk about it now, there’s almost no interest,” Smiles said in an interview on Monday. “From the third quarter of last year, there’s a growing belief that the U.S. dollar would start a sustained appreciation trend.”

The Aussie has tumbled 16 percent in the past six months to the weakest level since 2009 and Reserve Bank of Australia Governor Glenn Stevens has said he expects it to extend declines. The local dollar has fallen less than the euro and the currencies of Denmark, Canada and Norway this year and “should be the next domino to fall,” said Olivier Korber, a strategist at Societe Generale SA in Paris.


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