The Australian dollar – up for now, but likely to resume its long term downswing



Shane Oliver, Head of Investment Strategy and Chief Economist.

The attached note looks at the outlook for the Australian dollar.

The key points are :

  • A more dovish Fed, better Australian economic data, higher commodity prices and the reversal of high levels of shorts have seen the $A gain 12% from its January low. It could hit $US0.80 in the short term.
  • However, the bounce is unlikely to be sustained with a continuation of the secular downtrend in commodity prices and a narrowing in the interest rate differential in favour of the $A likely to see the $A resume its downtrend in the months ahead. Expect a fall towards $US0.60 on a 12 month horizon.

The downtrend in the $A will help the Australian economy, but highlights the ongoing case for global investments denominated in foreign currencies




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