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During February the Australian dollar strengthened against the US dollar from 0.7658 to 0.7717. Rising commodity prices continue to favour a stronger aussie and economists at MUFG Bank forecast the AUD/USD pair at 0.82 by end-2021.

Key quotes

“The global recovery/reflation trade is helping to improve Australia’s terms of trade as commodity prices continue to rally. The price of iron ore has recently surged sharply and is now trading close to its highest levels in almost a decade.”  

“If the external environment remains supportive for the Australian dollar as we expect, it will keep pressure on the RBA to maintain loose policy for longer.”

“The RBA’s latest policy update continued to signal that they plan to maintain loose policy even as the domestic recovery is proving stronger than expected. The QE purchase programme was extended until the end of September, and the RBA reiterated that it does not expect to begin raising their key policy rate until 2024 at the earliest. Still, we expect further Australian dollar upside.”