Is the Aussie still overvalued?

AUDGBP Drops as Aussie Borders Close Until 2022
Jonathan Watson

Exchange rate movements on the Australian dollar have been very substantial in the last few months. Since last year at the low the Australian dollar has weakened by over 40 cents presenting an incredible opportunity to buy the currency with both sterling and euros. The question is will this trend continue in the short term?

Holding out for big improvements could end in disappointment as early as next week. We have the first few hints of economic data for the UK for February. Whilst in Australia it is all sunshine and smiles, the UK has been enjoying (as they do) the wettest times in living memory! This has undoubtedly had an impact on the economy as people struggle to get to work and businesses close. The UK data released next week could therefore provide an opportunity for AUD sellers.

I expect that for now the rally is over and GBPAUD will in the short term struggle to get over 1.90. I think EURAUD will struggle to break 1.55. This is all because the RBA (Reserve Bank of Australia) have limited their scope from a weakening bias to a more neutral stance in their approach to the strength of the currency.

We could see this change but having only just recently adopted this stance, it is unlikely for a few months. I think therefore that whilst longer term the pound will make significant gains against the Australian dollar, if you have a short term (1 week to a couple months) requirement to purchase Australian dollars with pounds, moving sooner is sensible and purchasing on the spikes.

If you are considering buying Australian dollars or indeed selling them following say selling a property down under, we are specialist currency brokers who can assist in the management and planning of your foreign exchange requirements. We offer preferential rates above those offered by banks and other brokers. Please contact me Jonathan on [email protected] for more information including a breakdown and overview of your position.