Australian, New Zealand, Canadian dollar exchange rate forecasts

The team at Bank of America Merrill Lynch have downgraded their euro forecasts in their latest FX note. The downgrade comes as the bank reiterate a bullish stance to the US dollar, this based largely on the prospect of stimulus tapering:

"We think that the US shutdown will delay Fed tapering to next year; the base case is January, with substantial risks for a further delay. Assuming tapering in Q1 2014 and that the ECB avoids unconventional policies, we have revised our end-2013 EUR USD projection to 1.33 from 1.30. We have kept a downward EUR path for next year, but revised our end-2014 projection to 1.25 from 1.22."

So that is the euro, what is forecasted for the Australian, New Zealand and Canadian dollars? The question is answered below.

(Please Note: All quotes here are derived from the wholesale spot markets. Your bank will charge a spread at their own discretion. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering more currency. Please find out more here.)

USD vs Canadian dollar exchange rate forecast

"USDCAD failed to move out of its recent range of 1.02 to 1.05 in spite of the dovish policy shift by the BoC as the government shutdown and a pushing back of Fed tape ring counterbalanced each other.

"We maintain our year-end target at 1.04 for 2013 and 1.03 for 2014. Additionally, the impulse Canadian dollar has gotten from oil prices and the S&P500 has diminished the correlation of both falling to levels not seen in a couple of years."

Australian dollar vs USD exchange rate forecast

"We continue to expect AUD/USD to depreciate below 0.90 but a neutral RBA and delayed Fed tapering means this is unlikely to happen before year-end. We continue to expect AUDUSD to end 2013 at 0.91, although the risks to this projection are skewed in favour of a higher outturn.

"We would view any rallies above 0.95 as a good opportunity to sell for a return to levels below 0.90 by next year. We continue to expect AUD/USD to reach 0.88 in 2014, although in a domestic recession scenario (to which we attach a 25% probability), AUD/USD is likely to fall much further to the low 0.80s."

New Zealand dollar vs USD forecast

"We continue to expect the NZD to outperform the AUD over the medium term given the contrasting outlook for exports and because the RBA is more likely to cut rates. The dynamics of the NZD versus the USD will depend as much on Fed tapering as RBNZ tightening.

"We expect NZD/USD to remain above 0.80 until year-end and better supported than other USD-crosses, especially if New Zealand data continue to improve. However, with delayed Fed tapering largely priced in, we believe it will be lower than current levels by year-end."