Lehman recommends selling the Australian Dollar!

Bloomberg reports the Lehman Brothers recommends selling the Australian Dollar against the Japanese Yen since Australia may be seeing interest rate cuts next, which will narrow the current 5.6% spread in favor of the Australian Dollar. Besides, commodity prices could fall. Poppycock! We seldom see such nonsense in print. For one thing, the Credit Suisse interest rate swap version of interest rate forecasts indicates the RBA may cut rates by as much as 11 points in the next 12 months. This is up from 2 points on Monday, but still—11 points? The benchmark rate in Australia is 7.5% and the equivalent rate in Japan is 0.5%. There is no case for a significant rise in the yen against the Australian Dollar on this basis, even if Japan were to hike by 25 bp, which we say doesn’t come until next March, if then. And falling commodity prices?

Okay, very likely a correction in Australian export goods but certainly not a reversal.

Reag more at Rockefeller Treasury