Forecasts for the Australian and New Zealand dollar's downgraded at TD Securities

"A stronger USD and softer commodity prices account for some of the shift in our view on the commodity bloc. But the higher-yielding, higher beta currencies are also perhaps at some risk of weakening in the event of a rise in volatility," says Shaun Osborne at TD Securities.

Australian dollar forecasts

Commenting on the outlook for the Australian dollar Osborne says:

"AUD weakness plus overwhelming evidence that faster money prefers to play long USDJPY meant we lowered our year end targets for this year and next to $US0.96 and $US0.91 respectively.

"We cannot be any more bearish than that as (1) China and Japan are set to be long-term buyers of Australia's hard commodities and energy and (2) real money and central banks continue to diversify into high-yielding AUD."

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New Zealand dollar forecasts

TD Securities have tweaked their year-end New Zealand dollar (Currency:NZD) forecast from $US0.84 to $US0.83, and continue with our NZD outperformance theme.

"Our strongest trade bias remains buying the NZD against the major crosses, especially the AUD, targeting 1.15 by year end. As this pair has moved decisively in recent weeks, awaiting a fresh entry level around 1.22 (or 1.24 if patient) is recommended," says Osborne.

However; an all-out rut of the New Zealand dollar is unlikely owing to expectations of NZD-positive interest rate hikes in New Zealand.

Andrew Kelvin at TD Securities says:

"New Zealand is still likely to be the next advanced economy to tighten. High house prices and above-trend growth should set up the RBNZ to increase its policy rate in the first quarter of 2014."

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