The AUD has been in demand of late, irrespective of RBA Assistant Governor Kent’s more dovish remarks. While he reiterated that the AUD remains above most estimates of its fundamental value, he stressed that they did not rule out FX intervention to weaken the currency if needed.
However, it must be considered that inflation expectations, as for instance measured by breakeven rates, have been well supported regardless of weakening commodity price developments.
This in turn suggests there is little risk of the central bank considering such steps anytime soon. As such we expect the currency to remain driven by further improving global risk sentiment.
From that angle we do not exclude additional upside risk towards the end of the year.
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