(Bloomberg) — Real-money investors are at odds with analysts on the outlook for the Australian dollar this year, and data this week may provide the next cue for the currency.
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The Aussie has lagged most of its Group-of-10 peers this year, losing 2.5% versus the greenback. The decline has come against a backdrop of US banking turmoil, falling Treasury yields and the Reserve Bank of Australia’s decision to pause its rate hikes to assess the outlook.
However, this is not stopping researchers from predicting the Aussie to strengthen, forecasting the currency will end the year at 72 US cents per dollar, according to the median estimate in a Bloomberg survey. ANZ Banking Group Ltd. predicts it may even rise to 75 cents versus yesterday’s close of 66.41 cents.
The Aussie will finish the year higher as the US dollar is overvalued and is expected to “mean revert over a period of time,” said Mahjabeen Zaman, head of FX research at ANZ in Sydney. A rise in oil prices following OPEC+’s surprise output cut may also support commodity currencies, she added.
Asset managers have a completely different view. They hold a net short position of 37,669 contracts as of April 4, according to Commodity Futures Trading Commission data. That compares with a short position of 13,849 contracts at the end of last year.
Focus will be on a slew of Australian economic data this week including employment, business and consumer confidence, and consumer inflation expectations. If these signal a slowing momentum that backs the case for a rate cut this year, the Aussie is likely to come under pressure.
“Data in coming weeks could make it increasingly clear that conditions have deteriorated enough to shift the RBA’s focus from combating inflation to supporting growth next year,” said James McIntyre, a Bloomberg economist.
Of course, if the data signals more interest rate hikes are coming then analysts’ views will be validated. Technically, the currency pair’s 50- and 100-day moving averages are capping its upside while the area around its March 10 low of 0.6565 may act as support.
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