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Speaking to InvestorDaily, Mr Bryant said foreign investors will be “looking for other homes” that are more competitive as the Australian dollar drops and interest rates start to rise in the UK and US.

“The Australian dollar has already dropped to a four-year low and more downside is likely. I wouldn’t be surprised to see it go below 80 US cents in the near future,” Mr Bryant said.

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“In the UK, some Bank of England board members are already pushing for a rate increase to happen now rather than in 2015, and the US Federal Reserve has also indicated that it will increase rates around April,” he said.

“The problem with capital going offshore is it is a rush for the exits. If you have capital invested in Australia, yes the interests are attractive, but a five or eight per cent loss in currency really puts a dent in that proposition,” Mr Bryant said.

Mr Bryant also expressed his surprise at how well the Australian dollar has “held up so far” given the drop in commodity prices, and in particular in iron ore.

“This shows just how much foreign capital is chasing Australian interest rates, which remain high by global standards,” Mr Bryant said.

“However, once the interest rate differential shrinks – which will happen sooner rather than later – that foreign capital will [rush out],” he said.

 

Falling AUD to hit capital flows
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