SYDNEY (Reuters) – Analysts have again upgraded forecasts for the Australian and New Zealand dollars in the latest Reuters poll, but still lag the market as investors increasingly wager on a lasting downtrend for their U.S. counterpart.
FILE PHOTO: Australian dollars are seen in an illustration photo February 8, 2018. REUTERS/Daniel Munoz
Median forecasts put the Aussie AUD=D3 at $0.7000 on a one- and three-month horizon, compared with $0.6800 in the previous poll. The market, however, already has the Aussie at $0.7195, having just hit an 18-month top of $0.7241.
Yet analysts doubt the rally can get much further, putting the currency at $0.7100 in six months and $0.7300 in one year.
The Aussie was supported by the relative outperformance of the Chinese economy which continues to suck up Australian resources and boost prices for key exports including iron ore.
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That has gifted Australia with its largest current account surplus in decades, providing a net trade inflow to the Aussie.
Perhaps more importantly the U.S. dollar was having troubles at home, with the rampaging coronavirus infections setting back recovery and stoking speculation the Federal Reserve will have to ease policy even further.
“The global economic revival underway is one where the U.S. lags not leads the rest of the world. It implies a weaker USD,” said Ray Attrill, head of FX strategy at NAB.
“Our forecasts have been revised to reflect our increased conviction that the recent weakening in the USD is ‘for real’ and has a fair way to play out over the coming couple of years at least.”
He now sees the Aussie reaching $0.7400 by the end of the year and $0.7800 at the end of 2021, up from $0.7200 and $0.7500 previously.
The New Zealand dollar has benefited from similar forces, though again analysts polled seem to think it has topped out for the moment, putting it at $0.6600 NZD=D3 in one month and $0.6500 in three.
The kiwi was last trading at $0.6639, having climbed almost 3% in July to break major chart barriers and impress some analysts.
“NZD has sustained its break above a two-month old range at $0.6600, signalling a move to the $0.6750 area during the month
ahead,” wrote Westpac’s FX team in a note.
“Global risk sentiment, proxied by equities, remains elevated and the U.S. dollar continues to weaken.”
One near-term risk is a policy meeting of the Reserve Bank of New Zealand (RBNZ) next week which could see it protest against any further strength in the currency.
Polling by Sarmista Sen and Khushboo Mittal; Editing by Jacqueline Wong