Speaking to InvestorDaily, Mr Bassanese said the US economy is proving itself to be the most dynamic of the developed world countries.
The US is set to raise its interest rates relative to economies such as those of Europe and Japan, he added.
Mr Bassanese said the US is similarly a leader in the technology area, with the sector currently performing well in equity markets.
“You could argue we’re getting a re-run of the late 1990s where the US dollar was strong and the tech sector was quite strong,” he said.
According to Mr Bassanese, however, the US dollar is still at a relatively cheap level.
“We know it’s because the [US] manufacturing sector has been doing particularly well in recent years, benefiting from the cheap currency,” he added.
Mr Bassanese said the cycles in the US dollar index since the early 1970s have been fairly large but relatively uniform: “There have been two major upturns starting in 1978 and 1995 – each spanning just over 6 years and producing 52 per cent and 34 per cent gains respectively,” he said.
“The real exchange rate last bottomed in mid-2011 and has lifted by around 8 per cent over the past 3 years.”
Increases in the US dollar, Mr Bassanese said, will likely push the Australian dollar down to US$0.85 by the end of the year and down to US$0.70 in two to three years’ time.
“So it seems low, but it’s actually not that low when we actually stand back and look at the long run history of the currency,” he said. “Seventy cents would only restore its value to basically its long run average.”
A weaker Australian dollar would generally be a positive for the Australian equity market.
“In general, there are more exporters than importers in the market so it’s a net positive, but to really make the most of it, you’ve got to pick stocks rather than just sort of bet the currency is generally going to push the whole market a lot higher,” he said.
