Experts are confident that the current dynamics of the Australian dollar will turn into a decline. This is supported by the Reserve Bank of Australia (RBA)’s measure to curb the growth of the indicated currency.
According to analysts, the Australian regulator plans to control the strength of the national currency. Yesterday, they announced a $ 100 billion expansion of its quantitative easing (QE) program, which is currently being implemented at a rapid pace – 5 billion Australian dollars per week. The term of the existing QE will expire by mid-April 2021. Thus, experts believe that the additional amount of money supply will almost completely cover the expected annual budget deficit of the country.
Aside from that, the current strategy of the RBA also includes keeping the interest rate at 0.1%. The regulator is expected to keep it unchanged until 2024. However, experts emphasize that this is only likely if inflation is sufficiently low. They believe that the current rate of regulation helps to restrain the growth of the national currency.
Following RBA’s decision, the Australian currency temporarily declined, but then managed to overcome the negative mood. On Wednesday, the AUD/USD pair was trading nea the level of 0.7609, maintaining relative stability. Analysts argue that once the level of 0.7600 breaks down, an upward reversal is possible. If this happens, the AUD/USD pair will move down to the level of 0.7400 and below.
Experts think that the prolonged decline in commodity prices also adds pressure to the AUD. Australia’s national currency has been hit by a sharp decline in the price of China’s iron ore. It can be recalled that the Australian dollar is a commodity currency, and China is the main trading partner of the country. Thus, the current situation did not add positivity for the pair, instead it contributed to the weakening of its position.
Nevertheless, experts consider investing in commodity currencies, in particular in AUD, can be very profitable. They note a gradual increase in demand for commodities as the global economy emerges from the coronavirus crisis. A number of analysts believe that the so-called “weak currencies policy” pursued by many states will help the global economy cope with the negative consequences of COVID-19. Experts concluded that most countries are interested in curbing the growth of national currencies, and the Australian one is no exception.
The material has been provided by InstaForex Company – www.instaforex.com
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