Aussie Dollar Fell Behind the Major Currencies, but Spectra Markets Predicts a Recovery for AUD/USD

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The Australian Dollar (AUD) has had a difficult month, partially hindered by comparatively low bond yields that have kept it lagging behind most of its G20 peers. However, Spectra Markets is optimistic and gives AUD/USD a buy rating in anticipation of a recovery in the coming weeks.

Australia’s currency has been middle-of-the-pack for the week but near the bottom of the list when looking at its performance over the last month and year.

So far this year, only four currencies have fared worse than the Australian Dollar: the Turkish Lira, South African Rand, Korean Won and Norwegian Krone. This is seen as evidence of the antipodean currency’s insufficient yield returns compared to its peers. 

According to Brent Donnelly, CEO of Spectra Markets and a seasoned currency trader who has worked at hedge funds and major international banks like Lehman Brothers and HSBC, “There is this nagging weakness in AUD (and NOK) that no amount of SPX joy or commodity market happiness can cure. I suppose it’s still AU rates weighing on the currency.”

“Maybe it will take a hawkish RBA meeting on April 4 to finally jar the Oswald out of its slumber. If Aussie rates start flicking higher, AUD could be at 0.6900 in a blink,” he added. 

The Reserve Bank of Australia (RBA) has been steadily increasing the cash rate at each meeting, resulting in Australian government bond yields falling behind other countries such as the UK, Canada and the U.S., becoming more similar to France and Germany. This widening gap could explain why the Australian Dollar underperformed in March.

During their regular meeting on April 4, the RBA left the official cash rate at 3.6 per cent until May to control inflation levels and stimulate the economy. 

Despite uncertainty over the economic outlook, the RBA has signalled that it is confident in its decision to leave rates on hold and will continue closely monitoring the situation.

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