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The Australian dollar can extend a spell of outperformance, says Deutsche Bank.
The bank, one of the biggest prime dealers of foreign exchange in the world, says "we remain positive on AUD... the return to high-yielder status could encourage more debt inflows."
The Australian dollar is 2026's best-performing G10 currency, driven by firm domestic data, a Reserve Bank of Australia (RBA) rate hike and firm commodity prices.
Key factors behind Deutsche Bank's bullish thesis are:
○ The market is pricing ~40bps of further hikes this year, which seems plausible.
○ AUD still looks cheap vs relative rates
○ AUD looks cheap relative to commodity prices
○ Australians have been leveraging up, unlike peers, suggesting overall policy isn't tight
○ The return to high-yielder status could encourage more debt inflows
○ Government policy settings are stimulatory: the government's share of consumption is high and rising
○ An employment "boom" means Australia has recorded the smallest rise in unemployment of the peer group
