Westpac target year-end AUD/USD at 0.75
An update from WPAC on the Australian dollar.
- A$ is likely to be prone to setbacks in coming weeks, potentially as far as 0.7200/50. Our year-end target is 0.75.
- AUD probed 0.71 on 20 August ... Since then, the US dollar has been under pressure against commodity- and risk-sensitive currencies.
- no surprise to see A$ outperform the G10 in such a period but somewhat surprising that it has kept pace with the kiwi. This is despite markets pricing nearly 50bp of RBNZ hikes by year-end, in contrast to the RBA's projected 0.1% cash rate until 2024 and ongoing QE. The Aussie rebound is also despite Australia's Q3 GDP forecasts being slashed as the majority of the population remains in Covid lockdowns.
- One likely source of support is the conversion of historically immense mining dividends, A$18bn or more. There is also some optimism that by October/November, Australia's catch-up on vaccination should be starting to result in eased restrictions and thus scope for the economy to rebound.
Weekly candles AUD/USD: