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Analysts at MUFG Bank, see limited downside for the Australian dollar from here and they expect a gradual move higher.  They forecast AUD/USD at 0.7700 by the end of the second quarter and at 0.7900 by the end of the year.  

Key Quotes:

“The Australian dollar, like all G10 currencies suffered in March with some increased uncertainty over the favourable global growth outlook that persisted through the early part of the year. As was the case at the start of the year, the 10-year government bond yield in Australia and New Zealand remain the highest with the US Treasury bond yield closing the gap that existed at the start of the year.”

The RBA at its meeting emphasised again its commitment to keep policy exceptionally loose with QE to continue and no rate hike until 2024. The stance of the RBA in our view will help curtail AUD/USD gains but the fundamental backdrop will ensure gains ahead.”

“The RBA will continue to have a hard time convincing the markets of its ultra-loose policy persisting as long as suggested.”

“AUD is also set to derive support from favourable terms of trade conditions. The government forecast energy and resource exports to reach a record, close to AUD 300bn in the year to June with China demand helping lift iron ore and other commodity exports.”