Australian Dollar Volatility Kicks In: Updated Outlook for 2023

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The Australian Dollar (AUD) has experienced considerable volatility in the past few months, and the outlook for 2023 is uncertain. 

Several external factors, such as the Chinese policies, Chinese policies, minutes from Federal Reserve meetings, and US job statistics, have driven this downward trend. 

DailyFX stated, “China’s effort to extricate itself from the economically strangling zero-case Covid-19 policy seems to be presenting several challenges. While the official data depicts a situation that is under control, the anecdotal evidence from hospitals and morgues suggests a more problematic transition.

“The impact on markets is that Chinese economic activity may not accelerate as fast as had been hoped for.”

Additionally, Beijing’s shifting stance on policy might loosen restrictions on some Australian exports, such as coal, as the two countries’ cold relations begin to warm up.

The improvement to Australia’s trade balance won’t be that significant. Many enterprises affected by the export restrictions have found alternative markets for their goods since the restrictions began.

Due to the scenario, numerous firms decided to diversify their consumer base to limit the risk of relying too much on one clientele.

The outlook for 2023 is uncertain, but we will likely see more volatility in the currency. There are several potential catalysts for further AUD weakness, such as continued low-interest rates, a prolonged period of risk aversion and a slowdown in global economic growth. On the other hand, positive developments such as increased confidence in Australia’s economy or a recovery in commodity prices could support the currency and strengthen it against its major peers. 

In conclusion, volatility will likely remain a vital feature of the AUD in 2023. Investors should be prepared for the potential rapid swings in the currency’s value and seek to diversify their portfolios accordingly. In addition, they should pay close attention to changes in global economic conditions and geopolitical events that could impact the currency. With a cautious approach, traders can capitalise on any opportunities presented by fluctuations in AUD. 

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