The Australian dollar's descent to a six-month low could be a short-lived affair if forecasts in a Reuters poll of analysts are to be believed, while the New Zealand dollar is also seen stabilising after its recent slide. The survey of 52 analysts predicted the Australian dollar would be at $0.7600 on a one- and three-month horizon, before edging higher to $0.7800 a year from now.
That would be news to speculative bears who finally cracked major chart support at $0.7530 this week to press the currency down to $0.7501. "We think investors have overplayed the negative signal that rate differentials sent," said ANZ's head of FX research, Daniel Been.
"When all the factors that usually influence the AUD are taken into account, sentiment remains too bearish in the near term," he added. "Commodity prices are suggesting that the AUD should be closer to $0.8500." The currency has been under pressure as its yield advantage over the US dollar dwindled to almost nothing.
The spread of Aussie two-year debt over US notes has actually turned negative for the first time since mid-2000, when it was changing hands at 55 US cents. The US Federal Reserve is seen as all but certain to raise rates again next week, while the Reserve Bank of Australia (RBA) this week held rates steady for a fifteenth straight meeting.
Most economists polled by Reuters expect three more Fed hikes next year. While in Australia, skittish consumers and sluggish household demand across the A$1.7 trillion economy have added to the case for cash rates to remain at a record low 1.50 percent for a long time to come.
The futures market has responded by pushing out the likely timing of a hike, which is now not fully priced in until early 2019. Earlier this year, a move had been priced in for mid-2018. "We see limited upside for the Australian dollar," analysts at Morgan Stanley said in a note. The investment bank sees Aussie at $0.7000 at the end of next year.
"Wage growth is limited and now we are starting to see weaker consumption," they added. "We continue to watch $0.7690/7700 as a key technical area, but we do not look to participate in a potential rally." For the New Zealand dollar, analysts have left their forecasts mostly unchanged after a recent slide amid concerns the new Centre-left Labour government would pursue policies less welcoming to foreign investment.
The kiwi has fallen more than 6 percent since the general election in September. The median projection was for the kiwi to stand at $0.6900 in one month, down from $0.7000 in the previous poll. It was also seen staying at $0.69 right out to mid-2018, before edging up to $0.7100 by the end of next year. The currency was last trading at $0.6830, having slid from as high as $0.7557 in July to as deep as $0.6781 last month.
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