Aussie Rides Commodity Boom as Credit Suisse Joins RBS in Seeing 4% Gains

From coal to iron ore, soaring commodity prices are paving the way for the Australian dollar to rebound from its worst first quarter in five years.

Royal Bank of Scotland Group Plc says the currency may jump about 4 percent against the dollar by the end of September after the Standard & Poor’s GSCI Index of 24 commodities climbed three-straight quarters. Credit Suisse Group AG predicts it will rise that amount over a year. Futures traders boosted bets this month on a stronger currency to the highest since at least 1993.

The so-called Aussie may strengthen because the central bank will increase interest rates, already the highest in the developed world, while the Federal Reserve keeps borrowing costs at record lows, according to surveys of economists by Bloomberg. Demand from China for Australian raw materials, which account for about 60 percent of exports, may be augmented by Japan rebuilding from last month’s earthquake and tsunami that caused an estimated $300 billion in damage.

“The commodity story that is driving Australia, not just now but over the last few years, will continue,” said Ray Farris, chief strategist for Asia-Pacific fixed income and global head of foreign-exchange strategy at Credit Suisse in Singapore. “The fundamental picture for the Aussie over the next 12 months is very, very good.”