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The experience of the global financial crisis suggests that the AUD is unlikely to turn around until equities bottom. The Reserve Bank of Australia’s latest easing measures have limited FX impact in the view of analysts at HSBC.

Key quotes

“‘Risk-on-Risk-off’ (RORO) is firmly in the driving seat and the AUD is the most risk-sensitive G7 currency, helping to explain why it is also the worst performer this year.”

“It seems unlikely that the AUD will turn around until equities bottom. This was the experience during the global financial crisis. A similar fall this time could put AUD-USD close to a 20-year low, around the 0.50 level.”

“The RBA has announced it will cut its cash rate by 25 basis points to an all-time low of 0.25%. However, the FX impact is limited, given policy rates are already close to zero across G10 central banks.”