The Australian dollar is clearly out of favor with investors at the moment as low interest rates, falling commodity prices and problems with China all combine to pressure the currency but that may be about to change.
Iron ore Australia’s biggest commodity is down around 20 percent since the start of the year but has recently stabilized, and this factor along with recent positive round of economic data out of China may see the Aussie dollar reverse its fortunes.
“The drop in iron ore prices has soured the outlook for the economy” says says Saktiandi Supaat, an FX strategist at Maybank.
“We see it likely already in the price of AUD and the recent improvement in the China PMI-mfg numbers could see AUD move higher.” He added.
Most Analysts believe that the Reserve Bank of Australia will keep rates on hold this year and some think there won’t be any moves until 2020, but Mr Supaat believes the market has got it wrong and the RBA will hike rates in the 2nd half of this year as wage growth picks up after remaining flat for some time.
"We continue to see signs that RBA is poised to hike this Aug after a recent observation by RBA that the rate of wage growth appears to have troughed. This is something that we have been observing for the past few months and back our call for RBA to raise cash rate in August” he said.
“As domestic and external demand continues to strengthen and we look for the AUD/USD pair to break above 0.80 within this half of the year," he added
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