With a bright economic recovery outlook thanks to strong monetary-fiscal stimulus measures and an accelerating vaccine deployment, the overall global risk sentiment has steadily recovered, led to a strong increase in the group of risky assets, including currencies with high beta (risky) coefficients including AUD.

However, AUD is approaching the psychological resistance of 0.80-82, the highest price range since 2015. Up to now, AUDUSD has increased by more than 44% since the bottom was set in March 2020.

So is this rally overheating and will it trigger reactions from Australian policymakers? Please take a look at some of the comments!

The Reserve Bank of Australia (RBA) really wants their currency not to trade above 80 US cents, because that erodes the export competitiveness and the recovery of Australia's economy. after the pandemic.

Since floating in December 1983, the Australian dollar has averaged 75.90 cents. With such historical data, Australians tend to think that a rate with a 7 in front of it is fine, with an 8 it's going high, while if it's a 6, something very important is going on. out of the country or Australia itself is having problems.


Sean Callow, senior currency strategist at Westpac Banking (NYSE: WBK) Corp. “The discussion around the AUD will change, the RBA may also lose patience if AUDUSD breaks the 0.80 mark,” said in Sydney. However, with commodity prices supporting the AUD so strongly, the RBA should rest assured that their currency does not appear to be overvalued.”

Floating exchange rates act as shock absorbers for the economy: AUDUSD fell to 55 cents last March as market turmoil ensued due to the Covid pandemic. Since then, it has surged more than 40% as central banks pumped monetary stimulus, authorities contained the virus and commodity prices recovered.

Callow added: “The 80 cent level is an important milestone, the options are likely to be triggered or the stop loss orders will be filled.”

A large number of options contracts that give traders the right to sell up to A$4.3 billion for 79 cents remain in place until Friday, which will likely slow the pair's momentum. money in the next few days.

Export income is affected

As Australia's borders have been closed for nearly a year now, crippling the country's top export services, education and international tourism, the increase has increased, according to RBA board member Ian Harper. The price of the AUD is a concern. He pointed out that services account for 25% of exports, the remaining 75% are goods.

Trade statistics show that exporters with limited market share have been affected by eroded competitiveness.


Buy bonds

The RBA has made no secret of its interest in AUD prices when it launched a six-month, AU$100 billion ($79 billion) quantitative easing program in November targeting timed bonds. long maturity.

The Bank of Australia has continued this strategy, announcing that it will purchase an additional $100 billion from mid-April, when the current program ends. Christopher Kent, financial markets supervisor at the RBA, thinks the AUD would be higher without this QE scheme.

Kent further commented: “The AUD's historical relationship with commodity prices may have implied a much larger appreciation of the AUD. While history provides only a rough guide, this divergence suggests that the RBA's policy measures have contributed to the AUD becoming up to 5% lower, trade-weighted.”

In summary, if the price level of 0.80 is approached, it will significantly attract the attention of RBA and the whole market, selling pressure, at least in the short term, may return when the price approaches this resistance area.