The AUD is in an interesting position. On one hand it should be able to draw support from the fact that the RBA is one of the most hawkish central banks in the G10. On the other hand, as a commodities exporter, it is vulnerable to concerns about slow growth in China, Rabobank’s Senior FX Strategist Jane Foley notes.

AUD/USD may head back to 0.70 on a 6-month view

“It can be argued that the performance of the AUD in the year to date reflects the diverging impact of these fundamentals. Measured against the other G10 currencies, in the year to date the AUD is right in the middle of the pack. That said, it has climbed higher in the performance table in the past few days. For a short while this morning the AUD was the best performing G10 currency.”

“In the months ahead, we expect AUD/USD should draw support from rate differentials as the Fed launches its rate cutting cycle and as the RBA continues to look for a turning point in Australian inflationary risks. Consequently, we maintain the view that AUD/USD may head back to 0.70 on a 6-month view.”