​USD Weakness Extends AUD Upsides

WikiFX News (10 Dec.) - NZD/USD this week hit a fresh yearly high of 0.7454 and increased by 0.5% on Wednesday. The recent uncertainties and weak USD may put a premium on AUD.

Reserve Bank of Australia (RBA) Governor Philip Lowe said the bank could remain on the sidelines for the next few months because of the better-than-expected economy. “We continue to maintain our position that negative interest rates in Australia would be extraordinarily unlikely, as they could do more harm to the economy than good.”

In addition, the UK launched mass vaccinations this Tuesday. On the same day, Biden also pledged to vaccinate Americans after he takes office. These two positives enhanced market confidence, which in turn boosted the Australian dollar.

The DXY has fallen to 90.80 on the declining demand for safe-haven assets. “As long as US monetary policy remains focused on actual inflation and employment outcomes rather than forecasts, U.S. dollar weakness is likely to persist,” said Australia and New Zealand Group Chief Economist Richard Yetsenga.

Nomura analyst Andrew Ticehurst expected the Aussie to hit 0.7800 over the next 12 months, and “the dollar weakness and upbeat sentiment will continue in 2021.”

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Chart: Trend of AUD/USD