The Australian dollar is likely to see its first annual gain since 2020 as the country’s central bank maintains high interest rates and the economy benefits from expected stimulus measures in China.
According to the forecasts of Westpac and Bank of America, by December, the Australian dollar will rise to 68 US cents against the US dollar, an increase of 8.4% from the closing price last Friday. National Australia Bank and Westpac predict that after initial fluctuations, the Australian dollar will rise to 65 US cents against the US dollar by the end of June.
The Reserve Bank of Australia’s reluctance to enter a loose cycle has provided support for the Australian dollar. Investors are waiting for the inflation data to be released this week to determine whether this cautious approach is correct. The appeal of the Australian dollar has also been enhanced as China, Australia’s largest trading partner, has committed to stimulating domestic consumption to offset the US tariffs.
Oliver Levingston, a strategist at Bank of America in Sydney, said: “We expect the Australian dollar to gradually recover from the second quarter, initially due to the depreciation of the US dollar and then the lagged impact of China’s stimulus measures in the second half of 2025.” He added that the rise in the Reserve Bank of Australia’s terminal policy rate driven by stubborn inflation would also support the Australian dollar’s mid-term bottoming out.
Economists predict that after cutting borrowing costs for the first time in four years in February, the central bank will keep interest rates unchanged next month. Policy makers are cautious about further easing monetary policy as they want to see more evidence that inflation is under control.
Andrew Ticehurst, a senior strategist at Nomura Holdings in Sydney, said: “We think the terminal rate is priced too low.” He expects the Australian dollar to appreciate to 64 US cents in the second quarter due to a weakening US dollar. Based on historical relationships with commodity prices and interest rate differentials, the Australian dollar “is trading slightly below ‘fair value’.”
The Australian dollar has risen by 1.3% this year after falling nearly 10% in 2024. Data from the US Commodity Futures Trading Commission shows that hedge funds have significantly reduced their bearish bets on the currency since January, after their bearish bets reached their lowest level in a decade.
Westpac Bank has warned that the Australian dollar could fall below 62 US cents as risky positions are unwound before rebounding. Despite intense lobbying, Australia has not been granted exemptions from steel and aluminium tariffs, and there are concerns that the next round of exemptions could affect Australia’s major exports to the United States.
However, these trade policies and the US’s aggressive actions against its allies have made investors worried about economic weakness, thereby weakening the dollar. As the market has solidified expectations for the Federal Reserve to ease monetary policy and European spending has increased, undermining the trend of American exceptionalism, the dollar has fallen by 3% this year.
Richard Franulovich, head of foreign exchange strategy at Westpac, said: “A major shift in the Australian dollar against the US dollar is imminent. This opens the door for a sustained rise in the Australian dollar.”
Data from the U.S. Commodity Futures Trading Commission as of March 18 shows that hedge funds, asset management companies and other traders have collectively bet a total of $932 million on the weakening of the U.S. dollar.
This is in sharp contrast to the situation in mid-January, when traders bet $34 billion on the dollar’s rise. It is also the latest sign that Trump’s policies and doubts about the US economy are weakening (rather than strengthening) the outlook for the world’s reserve currency.
“The Trump policies we are familiar with have undergone a complete transformation,” said Paresh Upadhyaya, head of US fixed income and currency strategy at Amundi. “The chaotic and haphazard implementation of policies has brought about uncertainty,” and “altered the market’s perception of the impact of its policies on the economy, inflation and monetary policy, from stimulative to contractionary.”
Deutsche Bank strategists said in a report on March 19 that the previous expectation that Trump’s trade policy pledges would support the dollar is fading.
Meanwhile, strategists at Credit Agricole CIB have downgraded their forecasts, saying they “underestimated the extent of the damage to US growth from the US-led global trade war, along with public sector job cuts and immigration restrictions”, and this has sparked negative sentiment towards the US dollar.
Technical analysis:
Gold: As we clearly indicated in the plugin last Friday, after breaking below 2018, it eventually stabilized and rebounded near the 3000 integer level. For today’s trading, we will continue to monitor whether the price will retest around 3005 to attempt a low buy in the new demand zone; or after further adjustment, break through 3025/30 to attempt a momentum break-out trade. For detailed positions, please consult the plugin.
(Gold 15-minute chart)
The plugin is updated from 12:00 to 13:00 every trading day. If you want to experience the same plugin as shown in the chart, please contact V: Hana-fgfg.
Nasdaq: We clearly reminded in the plugin last Friday that we should wait for the liquidity below 19,660 to be refreshed before considering a rebound. After two consecutive weeks of adjustment, if the price can recover and stabilize above 19,900, it may rebound further. Within the day, it is advisable to try to buy at the gap on a pullback. For detailed positions, please consult the plugin.
(NASDAQ 15-minute chart)
The plugin is updated from 12:00 to 13:00 every trading day. If you want to experience the same plugin as shown in the chart, please contact V: Hana-fgfg.
Crude oil: The yellow and green operation combination in our plugin last Friday was perfect. After the price dropped below 67.64, it rebounded and rose rapidly. Today, we continue to pay attention to the new demand zone support to help the price start a new round of rebound. For detailed positions, please consult the plugin.
(Crude Oil 15-Minute Chart)
The plugin is updated from 12:00 to 13:00 every trading day. If you want to experience the same plugin as shown in the picture, please contact V:Hana-fgfg.
Today’s key financial data and events to focus on:
16:15 France March Markit/CDAF Manufacturing Purchasing Managers’ Index (PMI) Preliminary Value
16:30 Germany’s Markit/BME Manufacturing Purchasing Managers’ Index (PMI) Flash for March
17:00 Eurozone March Markit Manufacturing Purchasing Managers’ Index (PMI) Flash Estimate
17:30 UK March Markit/CIPS Manufacturing Purchasing Managers’ Index
20:30 US Chicago Fed National Activity Index for February
21:45 US March Markit Services PMI Preliminary Value
