Aussie dollar sees no light at the end of the tunnel
2023-08-14
Summary:
UBS said in March the currency would be benefited from the end of interest rate hikes by the Fed. But that will hardly play out with the expectation that the RBA is also nearly finished.
The Australian dollar is among the worst-performing developed-market currencies in the past year, a trend that looks set to persist.
UBS said in March the currency would be benefited from the end of interest rate hikes by the Fed. But that will hardly play out with the expectation that the RBA is also nearly finished.
Australia’s central bank will stand pat for two more meetings and then hike in November to take the cash rate to a 12-year high of 4.35%, a survey of economists showed.
The RBA is expected to cut rates in the second quarter of 2024 to support ailing economy as it sees unemployment rate climbing to around 4.5% next year.
Australian economy grew at a quarterly rate of 0.2% in the first three months of the year, well below 2.0% for the U.S., as China’s weak recovery weighs on commodity demand.
Goldman Sachs predicts the decline in iron ore prices will extend this year as the physical market tips into an imminent surplus. This is not good news for the top iron ore exporting country.
Lowe has flagged that further interest rate increases may be required if inflation remains above the target on Friday, but Commonwealth Bank of Australia said the Aussie could soon break its year-to-date low at 0.6458.
Hedge funds bore the brunt of the slide after turning the most bullish on the currency than they’ve been at any point this year.
Leveraged funds’ Aussie positioning swung to a net-long of 17,432 contracts in the week ended 8 August from a net short in the previous week, according to CFTC.
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