The fallback in the value of AUD/USD on Monday reflects the speculation that at Tuesday’s policy meeting the Reserve bank of Australia (RBA) will refrain from tapering this month and underpin its commitment to maintaining highly accommodative monetary conditions. Jane Foley, Senior FX Strategist at Rabobank, expects the aussie to sink to the 0.70 level in the coming months.
RBA has already established its dovish credentials
“While many Australian businesses have been impacted by the actions China has taken against various Australian exports, the overall impact has to date been limited. So far, it seems that many exports have found alternative destinations. Both the government and the RBA will be mindful that a softer exchange rate is a supportive factor in the nurturing of new trading relationship.”
“Given last month’s commitment that it ‘would be prepared to act in response to further bad news on the health front should that lead to a more significant setback for the economic recovery’, there is strong reason for tapering to be delayed.”
“It is our expectation that the USD will strengthen moderately on a three-month to six-month view against a broad base of currencies. Against this backdrop, we see scope for a dip to AUD/USD 0.70 on a three-month view.”
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