AUD/USD depreciating to 0.69 in three months ­– Rabobank

The Australian dollar is losing ground fast amid the dovish rhetoric of the Reserve Bank of Australia and rumours about Chinese customers cancelling orders of Australian coal. In this scenario, the strength of the US dollar, amid growing COVID-19 fears, might push the AUD/USD to 0.6900 over the next three months, according to the Rabobank FX Analysis Team.

Key quotes

“The AUD has slipped sharply today on the back of a strong signal from RBA Governor Lowe that further easing is on the cards. Talk of another rate cut has been building over the past month or so, but comments from Lowe have focused attention on the possibility that the Cash rate could be lowered from 0.25% to 0.1% as soon as the November 3 policy meeting. AUD/USD has tumbled around 1.2% in the past 24 hours or so and is around 2.3% lower relative to the end of last week.”

“While lower rates combined with the risk of more QE is a negative factor for the AUD, the additional worried out the long-term trend of coal exports is an additional threat. BHP is reported as having confirmed that Chinese customers have asked for deferrals of their coal orders.”

“While a dovish central bank and fear of restricted levels of Australian coal are negative AUD factors, we see potential for the USD to be supported by reduced risk appetite surrounding fears of a second wave of covid-19 in Europe and in part of the US. AUD/USD has dropped below our 1 month target of 0.71 and we see scope for a move to the 0.69 area on a 3 month view.”