SYDNEY (Reuters) – Analysts suspect the Australian and New Zealand dollars have climbed too far, too fast and a pullback is likely in the near term, though both are expected to move higher over a one-year horizon.
Analysts polled by Reuters see the Aussie at $0.6300 <AUD=D3> in one month, up sharply from the $0.6020 level predicted in the April survey.
Yet that would be down from the current $0.6533, which it reached in a blistering rally over recent weeks. The currency had hit a 17-year trough of $0.5510 in mid-March as lockdowns for the coronavirus sent global markets into a panic.
It then climbed more than 10 cents to hit a peak of $0.6570 by late April as central banks launched massive stimulus efforts and markets wagered the worst of the virus impact might be over.
“Near–term, we see the risk that markets falter and that a risk–off mood returns, potentially sending the AUD back to $0.6200,” cautioned Westpac chief economist Bill Evans.
Coming data is likely to show economies suffering record contractions with unemployment spiking to post-depression highs, he added. Company failures and earnings shocks would capture headlines from bulging central bank balance sheets and massive fiscal stimulus.
“In this next stage, risk aversion is likely to take hold and AUD’s stellar run is likely to go into reverse.”
The Reserve Bank of Australia (RBA) this week forecast the local economy would shrink by 8% in the year to June, while unemployment would double to around 10%.
Still, Evans saw the global economy slowly recovering late in the year, lifting the Aussie to $0.6600 by December and to $0.7000 by the end of 2021.
That was also broadly the position of the 43 analysts in the Reuters poll, who saw the Aussie at $0.6500 in six months and $0.6700 in one year.
The New Zealand dollar has also rallied from its lows, though not by as much as its neighbour. It is currently trading at $0.6119 <NZD=D3> having briefly been down as deep as $0.5469 at one point in March.
Analysts now saw it pulling back modestly to $0.6000 on a one- and three-month horizon, before rising again to $0.6200 in six months and $0.6400 in 12 months.
It will face a test next week when the Reserve Bank of New Zealand (RBNZ) holds a policy meeting amid speculation it might double the total for how much government bonds it plans to buy to NZ$60 billion ($36.72 billion).
Some analysts think it might even resort to negative interest rates later in the year, a drastic shift that would likely drag on the kiwi dollar.
(Polling by Sujith Pai, Indradip Ghosh and Khushboo Mittal; Editing by Sam Holmes)