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Is AUD the weakest link? – Rabobank

FXStreet (Barcelona) - Jane Foley, Senior Currency Strategist at Rabobank notes AUD to be the worst performing developed world currency on a 1 day view.

Key Quotes

"On a 1 day view, the AUD is the worst performing developed world currency and on a 5 day view it is third behind the yen and British pound. Although AUD/USD is trading above its November low, its current tone is undeniably defensive."

“The soft stance of the AUD should meet with the approval of the RBA. In the minutes of the November policy meeting, released yesterday, there was a clear effort to talk down the value of the AUD.”

“In terms of various estimates of purchasing power parity, as the RBA point out, the AUD is mostly overvalued; this has been the situation for some time.”

“Given that Australian inflation has expanded more than any of its peers apart from the UK since 2007, there is evidence to suggest that the value of the AUD exchange rate has not been unreasonably strong to date.”

“That said, the combination of softer economic conditions in Australia and the coincident improvement in US growth suggest there is scope for further downside in AUD/USD over the course of the coming year."

"We maintain our forecast of a move towards the AUD/USD0.85 level on a 6 month view. “

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