BofA: Super To The Rescue?

Bank of America write “we see a structural tailwind for the AUD from increases to mandatory superannuation (retirement savings) contributions.”

• “Rising superannuation AUM has occurred alongside a rise in hedging ratios - annual growth in hedged AUM has averaged 17.6% over the past decade.”
• “Weak China sentiment has weighed on the currency but the AUD trade-weighted index has traded in a tight range as current account surpluses and improvements in Australia's net international investment position have reduced the beta of the currency.”
• “We see rising superannuation fund balances as supportive of the currency and AUD demand in basis markets, especially if changes to the correlation between international equities and AUD drive hedging demand for superannuation funds' large equities holdings.”