Why the Australian Dollar has been so weak in 2023 so far. AUD/USD forecast
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
We are used to thinking that most world economies and currencies are somewhere between the average and negative phases of their evaluation in 2023. However, the Australian dollar stands out even against this background. Let's try to find out why the Aussie has been performing poorly during the first half of this year.
First, let's examine the chart depicting the AUDUSD exchange rate. This chart shows that even in a year that hasn't been particularly strong for the USD, it has been performing relatively well against the AUD.
For comparison, we've added EURUSD and GBPUSD lines on the same chart, approving that the US dollar is far from being a top performer in 2023.
One might say that the euro and the pound are more “significant” currencies compared to the Aussie. Okay, that might not be an entirely fair comparison. Let's then also check the DXY – it's the US dollar currency index measuring the strength of the USD against other major currencies. It can be considered as a mean value. As you can see, the AUD has been losing ground against all of them.
The Reserve Bank of Australia held a meeting on September 5 to discuss the interest rate. And usually, such events provide insights into future currency movements. However, in this case, it seems different. First, experts don't expect any key rate hikes or cuts shortly. And second, there is a factor that is more critical than RBA decisions (even in the case of changes). It's China.
Australia and China have strong trade and economic ties. Exports to China are vital for the Australian economy and its currency. China is Australia's primary trading partner.
Market participants expected that the Chinese economy would pick up steam after the cancellation of its zero-Covid policy. However, unexpectedly, it didn't. The growth has been much slower, and the Yuan has been weakening. Therefore, the local authorities have even initiated measures to stimulate the economy.
Other factors, such as the interest rate or decline in the housing market, might also affect the AUD rate. However, they are not game-changers. In other words, you shouldn't wait for them to sift the balance of power significantly.
Simultaneously, the USD looks solid at the beginning of the autumn, retaining its status as a safe haven with relative stability. And the nearest future is likely to be uneventful. There are no major catalysts for either the USD or the AUD in 2023. However, many things could change in 2024.
Just remember to stay updated with the news and conduct thorough research if you want to profit from trades involving AUDUSD or other assets.