Australian dollar outlook – Can we expect further weakness?

AUDGBP Exchange Rate Starts the Week in Strong Fashion

The Australian dollar is looking like it may struggle to weaken as a result of the moves by the RBA (Reserve Bank of Australia). I will explain more about this in the rest of this post but the point here should not be underestimated; that is the Aussie may not weaken dramatically in the same fashion we have seen it do so in the last year anytime soon.

Central bank Policy

The Reserve Bank of Australia had been seeking a weaker Australian dollar to try and improve their economic position. With over 40 cents, some 27% weakening over the course of the last year, the RBA have certainly achieved their goal. In 2014 the RBA have made two important announcements that anyone buying Australian dolalr should take note of. Firstly they said they had removed their bias towards any kind of rate hike which caused the Aussie to fall from the loft heights of 1.90+ against sterling. Second and more recently they have said there will probably be no further interest rate cuts in 2014.

This is key in determining the future direction of the currency as it makes it very feasible that the Aussie could indeed start to strengthen again against the pound and other contemporaries. In such a scenario we would be looking for sterling to strengthen to cause moves higher for Aussie buyers. There is of course the tapering process and EM (Emerging Market) sell-off which could cause the AUD to lose some value but I do not believe we would see the kind of sharp moves the Aussie is notorious for.

All in all buying AUD at present is at a very good level compared to rates of the last few years. Whilst the much longer term projection is for rates to climb to 1.90 and ultimately 2, this could be way off in the future, probably next year now. And it is likely we will see the rate dip below 1.80 into the 1.70’s before this happens.

If you are going to need to undertake a currency transaction buying or selling AUD in the future, making some careful plans now is a wise move. For more information on what to expect and how to transfer money internationally at the very best exchange rates please speak to me Jonathan on [email protected]

I look forward to hearing from you and assisting with any exchanges