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Here's Why A Trump Win Would Hurt The Australian Dollar

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Here's Why A Trump Win Would Hurt The Australian Dollar

It's no secret that the Mexican peso would lose value under a Donald Trump presidency, but according to Boris Schlossberg of BK Asset Management, investors looking to profit from the presidential election have missed the boat on this trade.

Speaking to CNBC's "Trading Nation," Schlossberg pointed out the peso has proven to be the "inverse proxy for Trump's political fortunes in the currency market for the last month." However, Schlossberg, the managing director of FX strategy, added that "a lot of that trade has already been priced in," and the peso has "taken a big beating" as Trump's campaign picked up momentum as of late.

Nevertheless, currency investors could still profit from a Trump victory and should look down south.

Related Link: Donald Trump Keeps Contradicting Himself, This Time On "Sources"

According to Schlossberg, China is Trump's second biggest "nemesis" after Mexico. He noted that since China is Australia's largest partner and Australia is China's sixth-largest trading partner, a Trump victory will "create a very big backlash."

Specifically, Australia "pretty much supports" all of China's commodities needs.

Also, given Trump's rhetoric against the Federal Reserve, the assumption can be made that U.S. interest rates will rise if Trump wins, which will further hurt the Australian dollar.

Finally, the currency pro labeled Trump as being "very unpredictable" and if there is one thing investors have no tolerance for is unpredictability. The Australian dollar is a "very strong risk trade" and could sell off in unison with global equities.

The iShares MSCI Australia Index Fund (ETF) (NYSE: EWA) seeks to correspond results with publicly-traded, Australian market securities. Year-to-date, the fund is up over 10 percent, but over the last one-month period, it is only up roughly 2 percent.

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Posted-In: Australian dollar BK Asset Management Boris SchlossbergSpecialty ETFs Forex Markets Media ETFs Best of Benzinga

 

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