AUD/USD remains the star of the G10 despite RBA's turns

Rabobank projects a bullish target of 0.69 for the Australian pair in 12 months

Rabobank analysts maintain a constructive outlook on the AUD/USD, anticipating that the Australian currency could reach 0.69 dollars within a year. Although Jane Foley, a currency analysis specialist, acknowledges a potential tactical pullback to 0.66 in the coming quarters as the market recalibrates its bets on the Reserve Bank of Australia’s rate hike cycle, the local macroeconomic fundamentals continue to support the AUD’s strength in the medium term.

The dilemma between higher rate expectations and central caution

Since late November, the Australian dollar has led performance among G10 currencies. This gain reflects initial speculation that the RBA could outpace other major central banks in raising interest rates amid persistent inflation. However, recent statements by Vice Governor Hauser have nuanced this scenario, suggesting a more gradual approach to normalizing monetary policy than traders had previously calculated.

Rabobank anticipates that this gap between market expectations and the central bank’s stance will generate temporary volatility but does not consider it will reverse the broader bullish trend of the AUD/USD.

Fiscal advantages and growth drive the AUD

Australia presents a robust fiscal position and a comparatively more favorable economic outlook than other G10 economies. This combination is likely to attract diversified investment into Australian dollar-denominated assets over the coming months.

The AUD/USD, after a moderate retreat today, remains the best-performing currency of the G10 year-to-date. Rabobank suggests that, regardless of short-term tactical movements, the strength of Australian fundamentals should support a move toward 0.69 in the twelve-month horizon.