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In view of Greg Gibbs, Analyst at Amplifying Global FX Capital, AUD is likely to be approaching a base, after falling from its high in around four years to its low in three years this year.

Key Quotes

“The RBA started the year saying, “An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast.” In November, it acknowledged that a lower AUD has helped support the economy. However, the overall movement has still been relatively contained; the range over the year-to-date is not spectacular with the AUD remaining within the same range for the last four years.”

“Many had thought that by now the AUD could have been a lot weaker with its yields below those in the USA by a record margin.   It seems that a further deterioration in yield spreads have contributed to weakness in the AUD this year and strength in the USD, but we may be approaching a major turning point in this spread widening. As such we could also be approaching a base in the AUD.”