12 May 2015
AUD/USD set to weaken towards 0.74 over 6 months – Rabobank
FXStreet (Barcelona) - Jane Foley, Senior Currency Strategist at Rabobank, expects the RBA to reassert its dovish position and help weaken AUD/USD towards 0.74 on a 6 month view.
Key Quotes
“Between September last year and April 2015, the value of AUD/USD dropped almost 20%. The series of rate cuts announced by the RBA was a factor but the broad based gains made by the USD played a crucial part in this move. The decline in the AUD’s value would have been welcomed by the RBA who have frequently complained about the overvalued nature of the currency.”
“Moreover, given concerns about the strength of the Australian property market and the build up of household debt, a monetary loosing implies by the exchange rate would have been particularly welcome to the RBA which may otherwise have had to cut rates more aggressively.”
“More recently, however, the USD has suffered a pullback as expectations of the timing of the first Fed rate hike have been delayed until later this year.”
“We expect that USD bulls can re-group but that the momentum of any further USD gains this year will lack the force that was experienced in recent months. Without a fast appreciation of the USD, the RBA will have more difficulty in talking down the value of AUD/USD. The delay in the first Fed rate hike therefore increases the likelihood that the RBA will be forced to reassert a dovish position.”
“We continue to see risk of a weaker AUD/USD, a look for a move towards the 0.74 area on a 6 mth view.”
Key Quotes
“Between September last year and April 2015, the value of AUD/USD dropped almost 20%. The series of rate cuts announced by the RBA was a factor but the broad based gains made by the USD played a crucial part in this move. The decline in the AUD’s value would have been welcomed by the RBA who have frequently complained about the overvalued nature of the currency.”
“Moreover, given concerns about the strength of the Australian property market and the build up of household debt, a monetary loosing implies by the exchange rate would have been particularly welcome to the RBA which may otherwise have had to cut rates more aggressively.”
“More recently, however, the USD has suffered a pullback as expectations of the timing of the first Fed rate hike have been delayed until later this year.”
“We expect that USD bulls can re-group but that the momentum of any further USD gains this year will lack the force that was experienced in recent months. Without a fast appreciation of the USD, the RBA will have more difficulty in talking down the value of AUD/USD. The delay in the first Fed rate hike therefore increases the likelihood that the RBA will be forced to reassert a dovish position.”
“We continue to see risk of a weaker AUD/USD, a look for a move towards the 0.74 area on a 6 mth view.”