AUD Exchange Rate Forecast to Make a ‘Significant Fall’ Against Most Peers Including GBP and USD

The Australian Dollar fell against all of its major peers including the Pound and US Dollar on Thursday after Reserve Bank of Australia Governor Glenn Stevens said that the currency was ‘overvalued’ and as retail sales in the land down under fell unexpectedly.

Addressing a meeting of the International Economic Society in Hobart, Governor Stevens said that the RBA believed that the ‘Aussie’ is overvalued and is set to weaken significantly over the next few months. He also warned that the Central Bank was growing concerned over a possible housing bubble emerging in Sydney.

“Let there be any uncertainty about this, let me be clear, again, that the exchange rate remains high by historical standards. When judged against current and likely future trends in the terms of trade, and Australia’s still high costs of production relative to those elsewhere in the world, most measurements would say it is overvalued, and not by just a few cents,” Stevens said.

The Australian Dollar was also under pressure after a report showed that retail sales in the South Pacific nation declined by -0.5% in May, beating forecasts for a rise of 0.3%. The decline adds to April’s drop of 0.1%.

“Right now I’d rather sell the Aussie Dollar. The RBA is reminding people of what they already knew, that there’s a problem between the level of the currency and what’s happening in commodity prices. Most importantly the Central Bank seems like it might even cut to respond to that,” said the head of foreign exchange and international rates strategy at JP Morgan Chase&CO in an interview with Bloomberg.

The ‘Aussie’ is likely to fall further later in the session as economists are forecasting that today’s US non-farm payrolls report will show that employment picked in the world’s largest economy. A strengthening of the ‘Greenback’ often weighs upon the ‘Aussie’.

Australian Dollar (AUD) Exchange Rates

[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Australian Dollar,,US Dollar,0.9369 ,
Australian Dollar,,Pound Sterling,0.5462 ,
Australian Dollar,,Euro,0.6860 ,
Australian Dollar,,New Zealand Dollar,1.0697 ,
US Dollar,, Australian Dollar ,1.0672 ,
Pound Sterling,, Australian Dollar ,1.8307 ,
Euro,, Australian Dollar ,1.4588 ,
New Zealand Dollar,, Australian Dollar ,0.9349 ,