The U.S. dollar was in a bull market between 1981 and 1985 that exceeded expectations. If that happens again, which seems possible, I would short the Australian dollar. Australia -- and Canada, too -- have overvalued currencies. Mining expenditures for minerals, oil, and gas accounted for 3% of Australian gross domestic product in the 1980s and ’90s. Today such expenditures are more than 7% of GDP.
There is a colossal housing bubble in Australia, fed mostly by rich Chinese. Also, bank loans for real estate are 60% of total loans, the highest ratio in the world, followed by Norway.
At the moment, the bullish consensus on the U.S. dollar is at a record, and bearish sentiment on the Aussie dollar is high. Many small speculators are short the Aussie dollar. It is possible the situation will reverse in the near term, and the Aussie dollar will rise 3%-5%. That is when I would short the Aussie dollar.
