Key Insights:
- AUD index against major trading partners shows a clear negative trend for currency since its peak in 2012.
- Over the past 12 months, AUD has weakened against most major currencies, the largest weakness was noted against the Yen and Swiss Franc.
- AUD weakness is also evident over the longer-term period of 3, 5 and 7 years which has benefited investors with unhedged offshore investments – growth and defensive.
- The weakness of the AUD has been fundamentally driven – while the commodity prices have been improving, the rate differential between Australian and 2-year is at 20-year lows. This has been underpinned by weaker GDP growth, lower inflation and dovish central bank.
- The outlook for AUD is positive against Swiss Franc and Euro but negative against the Pound, USD and Yen.
