SYDNEY (Reuters) - Foreign exchange analysts have trimmed near-term forecasts for the Australian and New Zealand dollars, but stayed upbeat on the long-term outlook despite the beating the two currencies have taken in recent weeks.
A Reuters survey of 55 analysts saw median predictions for the Aussie cut to $0.7200 on a one-month horizon, from $0.7275 in the previous poll.
Yet projections for three, six and 12 months remained doggedly unchanged at $0.7300, $0.7400 and $0.7500 respectively.
Such faith seemed surprising, given the Aussie has shed almost two cents since early September to hit 32-month lows at $0.7066.
The trade-exposed currency has been used by investors to wager on, or hedge against, tensions in emerging markets and the risks to the Chinese economy from U.S. tariffs.
A sudden surge in U.S. bond yields and hawkish commentary from the Federal Reserve has also driven the U.S. dollar higher more broadly. In contrast, the Reserve Bank of Australia (RBA) has repeatedly stated that its rates will remain at historic lows for some time to come.
“We see AUD/USD as a ‘70-75 cents currency’ for a good while to come, but with risk now skewed toward spending at least some time sub-$0.70 in the next six months or so if emerging market pressures do intensify significantly,” says NAB’s head of FX strategy Ray Attrill.
Only a handful of analysts in the Reuters poll forecast a fall under $0.7000 and the lowest call was for $0.6700 in three months, suggesting relatively limited downside.
Attrill argued that further out, the U.S. dollar would come under pressure of its own from the United States’ expanding budget and trade deficits.
“Successful efforts by China to offset much of the growth drag from weaker exports via policy stimulus would also help AUD,” he added.
For the kiwi, analysts again cut their forecasts by a cent or so, but the predictions still trailed the markets by some way. The currency was last trading at $0.6481, compared to the $0.6700 seen in the previous poll.
Expectations were now for $0.6600 in one and three months, with $0.6700 and $0.6800 pencilled in for six and 12 months respectively.
The downside risk was perceived as greater, though, with forecasts stretching as low at $0.6009 on a six-month view.
“We remain bearish, targeting $0.6400 or lower by year-end,” said Westpac’s head of NZ market strategy Imre Speizer.
“The main factor is an expectation the U.S. dollar will rise further as the Fed raises rates further and U.S. economic growth remains strong,” he added. “The yield spread between U.S. and NZ should move further in the USD’s favor.”
Yields on 10-year Treasury debt are currently 57 basis points above those in New Zealand, near the widest in history.
Editing by Richard Borsuk