Australian Dollar Forecasts: AUD Predicted at 0.8660-0.8825, is RBA Happy With AUD Levels?
- Written by: Gary Howes
The Australian dollar (AUD) is higher on the exchange rate markets today; but as with much of the forex market at present the forecast for the Aus dollar is murky.
The Australian dollar rose to a high of 0.8820 against the US dollar in late Asian and early European trade today after the NAB business confidence and conditions showed a rise to 6 from 5 prior.
The big issue at present is however turmoil in emerging markets, notably Turkey and Argentina, which created a negative market sentiment that saw the Aus dollar come under pressure. A Chinese slowdown has also added to weight on the Australian dollar and remains permanently in the shadows.
Nevertheless, today the Aus dollar is heading higher:
- The pound sterling to Australian dollar exchange rate is 0.8 pct down on a day-to-day basis at 1.8833.
- The euro to Australian dollar exchange rate is 0.95 pct lower at 1.5502.
- The Australian dollar to US dollar exchange rate is 0.7 pct higher at 0.8799.
Note: Our AUD quotes are taken from the wholesale spot markets. Your bank will charge a spread at their discretion when passing on a retail rate. However, an independent FX provider is so well placed on the market that they are able to deliver you up to 5% more currency. Please learn more here.
Normalisation in emerging markets and a good economic release from Australia have aided that country's currency higher. Commenting on the data, NAB said:
"Confidence has remained surprisingly elevated following the post-election jump, and could potentially remain at these levels for longer than previously thought given that the conditions index has begun to respond. Nevertheless, the increasing slack in the labour market and limited signs of a turnaround in real activity indicators - in light of the looming declines in mining investment - suggests these improvements may be fleeting, although higher building approvals and recent signs of life in the retail sector are encouraging."
Boris Schlossberg at BK Asset Management says the news produced a relief rally in the Aussie - which has been hammered relentlessly over the past several weeks - as chances of an immediate rate cut by the RBA receded in the wake of the data.
The report showed that confidence was relatively even across multiple industries and mainland states, including wholesale which previously has shown a sensitivity towards the Australian dollar.
Is RBA happy with current AUD levels? Nearly
The desire of the Reserve Bank of Australia to see the Aus dollar lower has proven to be a weight on the AUD over recent months. But, does the RBA now consider the currency to be near fair value?
Camilla Sutton at Scotiabank says:
"Today the RBA released a series of papers and emails on its views on AUD. Included within is a document suggesting that the RBA internal models see AUD as close to the level consistent with its medium term determinants but may be overvalued to the extent that it is judged to be too high to achieve desired domestic economic outcomes. Accordingly, even as the RBA works hard to keep a 0.90 ceiling on AUD its own internal work suggest the currency is increasingly close to fair value. We expect AUD to stabile in the second half of this year as improving global growth dynamics ease the pressure on the RBA and help to support the currency."
Australian dollar forecasts
"It remains to be seen whether the RBA policy of jawboning the Aussie lower in order to rebalance the economy will work, but for now at least it appears that business conditions have stabilized and therefore Aussie may have found a near term bottom at the 8650 level," says Boris Schlossberg at BK Asset Management.
Emmanuel Ng at OCBC Bank gives us his short-term forecast on the Australian dollar to US dollar exchange rate saying:
"Early this morning, the Nov 13 Conference Board leading indicator for Australia continued to weaken with a 0.2% gain from 0.5% in the previous month. Like the JPY, the AUD may also remain a function of any potential EM jitters or negative news flow emanating out of China (especially with respect to the shadow banking front). Our view remains largely unchanged and we expect potential heaviness to persist in the near term within a 0.8660-0.8825 range."
"The current recovery will be limited to resistance at 0.8888. As the pair maintains bearish trend, there’s risk for a break through support at 0.8545 and then extend to critical 0.8067," says Gareth Berry at UBS UBS.
Pound to Australian dollar exchange rate (GBP/AUD) forecast
After sessions at the mercy of a buoyant pound, the Aussie finally managed to prevent the rate from rising further, "as the market felt the currency’s losses were excessive. China’s biggest bank, the Industrial & Commercial Bank of China Ltd successfully avoided a default and this has also helped renew appetite for the Aussie," says Sasha Nugent at Caxton FX.
The UK GDP figure has managed to reverse some momentum and so Caxton expect the rate to trade around 1.8900 today.
UK GDP came in at 0.7 pct in the last quarter, confirming the UK economy grew at its fastest pace since the economic crisis.
Commenting on today's GDP figures, Ms Lee Hopley, Chief Economist at EEF, the manufacturers' organisation, said:
"Good economic news continued in the last three months of 2013 giving the UK its first four-quarter run of growth in over three years. GDP maintained a healthy pace of expansion with the ONS estimate of 0.7% growth coming a touch lower than expectations, mainly due to a small drop in construction.
"Taken together with upbeat business surveys the hiccough in the notoriously volatile construction figures should be a short term interruption in what has been a trend of positive data across all major economic segments in the previous couple of quarters. Indeed Q4 manufacturing growth of 0.9% was bang in line with expectations and survey reports of a strong pick up in production and orders through the final months of last year. Looking to the year ahead, a decent demand outlook at home and steady growth in markets overseas should see industry maintain a robust pace of growth in 2014."
