The commodity story remains very positive for Australia. Relative to commodities prices the Australian dollar isn't overvalued.

This is one weak number in the context of an extremely strong economy. One data point doesn't make a trend,

I consistently say the Australian dollar is heading higher. Commodities are at the start of a 15- to 20-year bull run.

High commodity prices are boosting Brazil's terms of trade and leading to record trade surpluses. A favorable external backdrop and still high real interest rates should support the Brazilian real.

If the market begins to expect a more imminent end to the Fed's tightening cycle that would certainly remove the interest rate support for the dollar,

If you look back to 1994 when the Fed was hiking rates continuously, after every rate hike the Fed adopted a neutral bias. However, the tightening cycle continued until early '95, for a total of 300 basis points (3 percent). We are not looking for that type of tightening cycle this time, but nevertheless it does suggest that the neutral bias does not preclude further rate hikes down the road.

The Australian currency may rise to US80c over the next month.

The trend is still toward wider deficits, so this is a concern for the U.S. dollar. I continue to forecast it lower.

At these levels, the Australian dollar is looking attractive. A decline in U.S. interest-rate expectations is beneficial for Australia.

We don't think it'll be enough to halt a move at this month's FOMC meeting, ... We still look for the Fed go 25 basis points.