By Stuart Washington
THE Australian dollar is overvalued against any currency you care to name, according to London-based analyst Jeremy Hale.
And investment bank Deutsche forecasts it will fall to about US87¢ by next September.
Yet there it was again yesterday, enjoying more than 24 hours above its US dollar counterpart, crossing $US1.01 and pushing towards $US1.02.
Part of the story is not so much a surge by a victorious Australian dollar as a fall by the US dollar as investors come to grips with the Federal Reserve's plan to put an extra $US600 billion into circulation by buying US Treasury notes.
Another part of the story is the Australian currency rising on a wave of liquidity, fuelling belief in a continuing China-driven commodity boom. Plenty of speculators are betting the run has further to go.
In a recent interview, Jeremy Hale, the London-based head of macro strategy for Citibank, said that on his analysis the Australian currency was overvalued by more than 15 per cent against both the US dollar and a basket of currencies.
He contrasted Australia's policy of setting no controls on capital inflows with the more interventionist approaches of Asian countries, including South Korea and Japan, which are striving to prevent their currencies appreciating.
''The thing about the Aussie is there's not going to be any resistance to it, not any capital controls, nobody is going to stop it going up if the story is still good,'' Mr Hale said.
''You have got a flood of liquidity which is going to generate a positive appetite for risk. Equities tend to do better, credit tends to do better, commodities will tend to do better.
''All of that is positive for the Aussie. The only issues with the Aussie are about valuation. For example, the Australian dollar has outperformed just about every currency on the planet in the last year or so.''
In Mr Hale's view, the appreciation has been faster than warranted by the higher interest rates available in Australia, faster than equities and faster than commodities since the September 2008 collapse of Lehman Brothers.
He said the closest match to the Australian dollar was the world index for commodity prices, showing the dollar as a proxy for the China-fuelled commodities boom.
''It's got that speculative element, which means it's always going to go up by the stairs and down the lift shaft,'' Mr Hale said.