AUD/USD rally to extend further into next year - HSBC
21.09.2020, 13:44

AUD/USD rally to extend further into next year - HSBC

FXStreet notes that the rally in the Aussie is built more on solid fundamentals than speculative excess. This should mean the Reserve Bank of Australia (RBA) takes a hands-off approach. All in all, economists at HSBC expect the AUD/USD pair to rise further in 2021.

“The RBA has communicated its relative comfort with FX strength lately. In the minutes for the September monetary policy meeting, the central bank repeated its view that the rally in the AUD is in line with fundamentals, although it would prefer the AUD to be weaker (source: RBA, 15 September 2020). Overall, the rhetoric does not suggest that the RBA views the currency as misaligned.”

“We do not see any warning signs of extreme speculative positioning. There are also strong signs that the recent AUD rally is in line with fundamentals. For instance, the price of Australia’s export basket of commodities has stayed relatively elevated and is now higher than at the start of the year. The rebound in economic activity in China, including infrastructure investment, bodes well for these bullish fundamentals to persist into 2021. Meanwhile, yield differentials have moved firmly in favour of the AUD, given Australia’s economic contraction has been less than that of peers.”

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