SYDNEY (Reuters) - Analysts have upgraded their outlook for the Australian dollar for a second straight month, even as the currency hit a three-week low amid a general flight from risk.
A Reuters poll of 51 analysts saw the Aussie at $0.7600 in one month, up a cent on the March survey. There were matching moves in long-term forecasts with the Aussie seen at $0.7500 in three months and $0.7400 on a one-year horizon.
The near-term call is in doubt with the Aussie trading at $0.7540 on Friday as repeated failures to sustain a break atop $0.7700 in the past two months have left charts looking bearish.
There was also less appetite for riskier carry trades - borrowing in, say, yen to buy Aussie - as political deadlock dimmed expectations of fiscal stimulus from President Donald Trump’s administration.
“We recently highlighted the return of risk aversion as a notable AUD driver and long positions are being squeezed by the cooling global risk mood,” said Sean Callow, a senior currency analyst at Westpac.
“This remains the case, with jitters over the stalled Trump agenda undermining equities.”
The Reserve Bank of Australia (RBA) had also dented the currency this week by sounding more concerned about the labour market, with unemployment hitting a 13-month peak in February.
Combined with low inflation and wages growth, that made it very unlikely the bank would be following the Federal Reserve in hiking rates this year, narrowing the Aussie’s yield advantage.
The premium paid by Australian two-year debt over its U.S. counterpart has dwindled to just 44 basis points, the smallest since early 2001 and down from 119 basis points this time last year.
The currency is finding support from past increases in prices for Australia’s major commodities which have delivered four straight months of trade surpluses after years of deficits.
Vivek Dhar, a commodities analyst at CBA, estimates Australia’s terms of trade, or the ratio of export to import prices, climbed a further 7 percent in the first quarter.
“The higher ToT will continue to boost nominal GDP growth, company profits, budget revenues and the AUD,” said Dhar.
An added wrinkle came this week when floods in Queensland badly disrupted the supply of coking coal from the region sending prices surging 50 percent to $235 a tonne.
Coking coal is a major export earner for Australia and, even though volumes will be hit, the higher price should get locked into contracts for the entire second quarter.
Across the Tasman Sea, forecasts for the New Zealand dollar were nudged lower. The kiwi was seen at $0.7000 in one month, down a cent from the March poll, and staying there out to three months. It was last at $0.6970.
The six-month outlook dropped half a cent to $0.6900 and the 12-month view a touch more to $0.6800.
The currency has been slipping since the Reserve Bank of New Zealand last month reaffirmed its intention not to raise rates for perhaps another two years, undermining carry trades.
“Against a backdrop of large oscillations in NZD/USD during the past six months, we err on the side of negativity for the next few months,” said Imre Spetzer, Westpac’s currency analyst in New Zealand.
“Our main rationale remains our its trend higher amid a tighter Fed and stronger U.S. economy. We target $0.6900.”
Reporting by Cecile Lefort; Editing by Eric Meijer