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Aussie Dollar Hits Four-Month High

The Australian dollar (AUD) has reached a four-month high, hitting US67.94 cents as of this morning. A number of distributors told ChannelNews that prior to the COVID-19 pandemic, they had hedged the dollar at close to US67 cents.

The strengthening AUD will therefore be good news for retailers and distributors.

Over the past year the declining AUD has squeezed retail margins, as retail prices have not kept pace with the depreciation of the dollar.

This latest uptick marks an increase of 2.27% compared to closing on Friday, when the AUD sat at US66.64 cents. Over the past year the AUD reached a low of US57.37 cents in March.

AUD/USD Bloomberg

According to the NAB, the weaker US dollar is only part of the reason the AUD is continuing to rise, stating: “Risk sentiment, both in terms of the ongoing US equity market rally but also vis-à-vis the risk metrics most relevant for the AUD, have also continued to improve.”

Better-than-expected manufacturing figures from China have also played a key role. China’s most recent purchasing managers’ index (PMI), released on Sunday, noted significant improvements in Construction and Steel PMIs.

Commodity prices are another contributor to the stronger AUD. Notably, iron ore prices have risen from below $92 to $97.

Looking ahead, Westpac has forecast that the AUD will fall slightly to US64 cents in June, but expected it to rise to US68 cents by December, and US70 cents by March 2021.

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