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Dollar’s rise shows need for scenario planning: StatePlus

Dan Purves




The rise in the dollar following yesterday’s rate cut reinforces the need to have a robust risk framework, says Damian Graham, chief investment officer at StatePlus.

The Reserve Bank of Australia’s decision to reduce interest rates to a new record low of 1.5 per cent, while widely anticipated by many economists, counter-intuitively saw the AUD rising in value with it gaining more than 76 cents against the greenback.

“More commonly at the moment, the reaction and response from the market may be at odds with what you intuitively expect,” Graham said.

“The uncertainty and the way the markets are performing, continues to be a pretty challenging environment in which to deliver absolute returns.”

He added that StatePlus’ investment perspective of ensuring a robust risk framework was in place, facilitating an understanding of potential outcomes, was even more pertinent in a continuing volatile environment.

“Generally we will continue to view the markets as being fairly fully priced, with the low growth environment being pervasive across the globe. Its modest growth – not zero growth nor negative growth – and the fairly full valuations for most asset classes suggest volatility is likely to continue.”

From an income generating perspective for retiree members, Graham said yesterday’s rate cut will only have a moderate impact, as the majority of StatePlus’ members have a diversified approach.