The Australian dollar lost value against all major currencies on Thursday following a decision by National Australia Bank to raise mortgage rates for owner-occupiers and investors with variable home loans. Similar hikes were introduced by other large Australian banks in 2018, including Commonwealth Bank, Westpac and ANZ, and such hikes remove much of the incentive the RBA once had to raise its currency-supporting cash rate.
Such is the gloom surrounding the Australian economy that Capital Economics announced on Thursday it had revised its AUD/USD forecast for 2019 year-end from an already-disappointing US65¢ to only US60¢—15 percent lower than the current quote of US70.9¢ and a whopping 26 percent lower than 2018’s best rate of US81.35¢.
Capital Economics also predicts that the RBA will be forced to cut its cash rate by 50 basis points to a record low of 1.0 percent. Chief among its reasons for the prediction are increased risks for the Australian housing market and general pessimism on China, a senior economist at the group told the Australian Financial Review.
It is the record level of household indebtedness associated with overinflated home prices that troubles experts at Rabobank, which predicts AUD/USD at US68¢ before the year is out.
Like Capital Economics, Rabobank sees the RBA cutting interest rates.
“You’re in a doom loop. Now that the Federal Reserve is finally on hold, the RBA can finally talk about cutting again, and they will,” Michael Every, a senior economist at Rabobank, told Bloomberg on Wednesday.
To the aforementioned narrative can be added last week’s stark warning from a senior researcher at BNP Paribas Asset Management, who said that the Australian dollar will get “absolutely crucified” and might lose as much as 30 percent of its value.
Not convinced, though, are the team at National Australia Bank.
“What we can say is that AUD/USD has traded [in January] convincingly below US70¢ for the third time in 5 years and each time failed to spend very much time there . . . [and] this leaves us as comfortable as we can be that AUD/USD will remain for the most part a US70-75¢ currency for many months to come,” NAB wrote on Wednesday.
Although the Aussie is losing value across the board, it continues to be hardest hit against the resurgent British pound. AUD/GBP slid on Thursday to a 3-month low of 54.2p—nearly 5 percent lower than rates a fortnight ago.
NAB had words for AUD/GBP watchers this week: it said that the likelihood of a disorderly Brexit had, in its opinion, diminished greatly, and as a result an exchange rate of 50p—a rate not seen since 2016—should be expected before the end of June.
Please note that the opinions of our authors are their own and do not reflect the opinion of Best Exchange Rates
and should not be taken as a reference to buy or sell any financial product.
General advice: The information on this site is of a general nature only. It does not take your specific needs or circumstances into consideration. You should look at your own personal situation and requirements before making any legal, accounting or financial decisions. The foreign exchange rates and products compared on this page and website are chosen from a range of products that bestexchangerates.com (BER) has access to and are not
representative of all the products available in the market.
We may receive referral fees in relation to your activity on the BER website however this doesn't affect the exchange rates or fees you are charged.
The use of terms "Best" and "Top" are not product ratings and are subject to our disclaimer.