ANZ Forecasts AUD to Stay Strong But Falter Eventually

The Australian dollar’s persistent buoyancy won’t last forever, ANZ said, keeping a bearish view even as it raised its near-term forecasts for the currency.

“While we continue to think that the fundamental grounds for a rally are not in place, market volatility has not provided the catalyst for weakness that we anticipated,” the bank said. “We cannot identify near-term drivers of a significant depreciation,” it said, noting the lack of Brexit contagion and an indication that the Federal Reserve may accept a lower neutral rate.

A neutral interest rate is the rate at which monetary policy neither accelerates economic growth or slows it down; many economists have postulated recently that the U.S. neutral rate may now be lower than in previous economic cycles.

ANZ increased its end-year forecast for the Australian dollar to $0.76, up from $0.67.

The currency has rallied hard this year, rising from under $0.70 at the beginning of the year to as high as levels above $0.77 last week. At 11:04 a.m. HK/SIN, the Australian dollar was fetching $0.7587.

But ANZ said it still expected the Aussie dollar to face serious headwinds. Its latest forecast is for the currency to fall below $0.70 in 2017’s December quarter, before sliding as low as $0.66 by 2018’s March and June quarters.

via CNBC

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, he established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza