By Wayne Cole
SYDNEY (Reuters) – Analysts have nudged up their forecasts for the Australian dollar as the currency proves resilient to global trade uncertainty and poor economic news at home, though the risk of radical policy easing looms for next year.
Analysts polled by Reuters see the Aussie at $0.6800
The currency was then seen rising to $0.6900 in six months and $0.7000 on a one-year horizon, again a cent higher than in November.
This time last year, the call was for the Aussie to end 2019 at $0.7500, a seven cent miss due largely to the endless Sino-U.S. trade dispute and three rate cuts from the Reserve Bank of Australia (RBA).
The outlook for rates remains a big unknown for next year with markets wagering it will cut at least once more to 0.5% and even take the plunge into quantitative easing by buying government debt.
A run of recent data showed the economy disappointed in the third quarter and looks little better for this quarter, putting the RBA in a bind.
“We now expect a rate cut to 0.5% in February and a further cut to 0.25% in August,” said Stephen Halmarick, head of global markets research at CBA. “Those cuts and a small risk of QE in late 2020 will limit the Aussie’s upside.”
However, he also noted there had been a structural improvement in Australia’s external balances as it ran current account surpluses in both the second and third quarters, the first since 1975.
“That provides valuation support for the Aussie,” said Halmarick, tipping the currency to reach $0.7000 by end of 2020.
Forecasts for the New Zealand dollar
It was seen at $0.6550 in one year, compared to $0.6500 back in November. The currency was way ahead of analysts, however, having rallied sharply this week to reach $0.6542.
The kiwi has benefited from a marked improvement in recent economic data at home, a divergence that has seen it jump on the Australian dollar.
It also got a fillip when the Reserve Bank of New Zealand (RBNZ) announced bank capital requirements that were less harsh than many feared, removing one source of risk.
That was meaningful enough for ANZ to change its New Zealand rate forecast to only one cut next year instead of two.
“Contributing to our change of call is the fact that a new tailwind is on the way, with the Government signaling that a ‘significant’ increase in infrastructure spending will be announced on Dec. 11,” wrote analysts at ANZ.
(Polling by Sujith Pai and Nagamani Lingappa; Editing by Sam Holmes)