13 Aug 2015
AUD/USD to visit 0.68 by end 2016 – BAML
FXStreet (Edinburgh) - In the view of analysts at BAML, the bearish tone in the Aussie dollar could send spot to the 0.68 area by year-end 2016.
Key Quotes
“AUD/USD reached our end-2015 target of 0.73 in July. We remain medium-term AUD bears but the risk-reward of selling at current levels is not attractive, in our view, especially under our baseline scenario that the RBA will not cut rates further”.
“The RBA should maintain its message that further exchange rate depreciation is likely and necessary but the pace of depreciation may slow in the absence of further easing”.
“That said, we have often argued that Australia requires an undervalued exchange rate to support the non-mining sector and ease the balance of payments adjustment. There seems little reason for the RBA to substantially alter its FX stance just yet and risk an adverse appreciation in the currency”.
“The fundamental "big picture" remains negative for the AUD and we believe the exchange rate will need to stay below “fair value” if it is to provide any degree of support to the economy”.
“We continue to forecast AUD/USD to end 2015 at 0.73 and 2016 at 0.68. There are clearly downside risks to this forecast profile but we leave it unchanged for now as we await more clarity on Fed lift-off and the RBA’s reaction function”.
Key Quotes
“AUD/USD reached our end-2015 target of 0.73 in July. We remain medium-term AUD bears but the risk-reward of selling at current levels is not attractive, in our view, especially under our baseline scenario that the RBA will not cut rates further”.
“The RBA should maintain its message that further exchange rate depreciation is likely and necessary but the pace of depreciation may slow in the absence of further easing”.
“That said, we have often argued that Australia requires an undervalued exchange rate to support the non-mining sector and ease the balance of payments adjustment. There seems little reason for the RBA to substantially alter its FX stance just yet and risk an adverse appreciation in the currency”.
“The fundamental "big picture" remains negative for the AUD and we believe the exchange rate will need to stay below “fair value” if it is to provide any degree of support to the economy”.
“We continue to forecast AUD/USD to end 2015 at 0.73 and 2016 at 0.68. There are clearly downside risks to this forecast profile but we leave it unchanged for now as we await more clarity on Fed lift-off and the RBA’s reaction function”.